Mining: Turn closed mines into assets

At the moment, a last mine closure plan is required solely two years earlier than the ultimate mine closure. (File picture)

By Satnam Singh

India wants clearer regulatory prescriptions, with higher technical and monetary methods, to minimise the environmental and security hazards emanating from deserted or exhausted mines, and unlock the financial potential of those land parcels.

The mining sector has been one of many prime movers of the economic system, contributing ~2.5% to the GDP as of FY20. Nonetheless, whereas its advantages are clear, the sector’s environmental affect (land degradation, water and air air pollution) and socio-economic prices (well being hazards, alteration of social construction, and so on) haven’t been addressed adequately.

There have been some reforms, in fact. For example, miners are required to submit progressive mine closure plans for five-year durations from the start and a last mine closure plan close to the top of the undertaking. A requirement of economic assurances has additionally been provisioned for each coal and non-coal minerals, as a safeguard towards the liabilities. Additionally, following a Supreme Court docket directive, the federal government has made re-grassing of mined-out areas a compulsory situation whereas giving inexperienced clearances to mining initiatives.

Limitations of present norms
At the moment, a last mine closure plan is required solely two years earlier than the ultimate mine closure. This limits the regulators’ capacity to evaluate whether or not the applicant has recognized its obligations and is able to addressing these. The closure necessities have additionally not been spelt out explicitly, leaving scope for liberal interpretation by the miners. Additional, the unit charges are flat and low. The 2019 pointers present an inflation-indexed unit price for coal initiatives, which stood at Rs 9 lakh per hectare in 2020. For minerals apart from coal, the speed is Rs 1.5 lakh/hectare. As compared, the unit price in Western Australia varies within the vary of Rs 1-28 lakh per hectare and Rs 1-26 lakh per hectare in South Africa, based mostly on the class of land disturbance/related work.

Additionally, at the moment, the reassurance quantity is deposited in a tripartite escrow account (for coal) annualised over the mine’s life. Given the lengthy mine lifetime of mineral deposits, the regulator is uncovered to vital liabilities in case of mine abandonment in early phases. Primarily based on the unit charges for coal mines, the reassurance required for an space of two,550 km2 is of Rs 22,950 crore, whereas the quantity held by the coal controller till 2019 was simply 42% of this, at Rs 9,765 crore. For different minerals, for 3,250 km2, the requisite quantity of ensures is Rs 4,875 crore, whereas the quantity within the authorities’s fingers is Rs 2,000 crore. Additional, the system of refunds is inappropriate, beneath which as much as 50% of the escrow deposit could be refunded based mostly on expenditure on closure actions.

Six steps that may assist
First, there ought to be an in depth guiding doc for mine closure plans, highlighting the obligations and the content material/info to be furnished. Second, the mine closure plan ought to be sought on the time of licence approval – on a conceptual foundation, and reviewed periodically – in order that the dangers and liabilities are accounted for from the start. Third, the unit charges getting used for calculation of economic assurance ought to be reviewed and aligned to true closure prices based mostly on a pattern of mines. Fourth, the present system with liabilities extending till the top of the mine’s life, ought to be re-examined. Fifth, the refund system, which is expense-based at the moment, ought to be made performance-based and linked to milestones. Additionally, there ought to be a self-sustaining funding mechanism to sort out orphaned mines.

To reiterate, with clear pointers, planning and implementation, and accountable closure, we are able to minimise environmental injury and unlock the financial potential of closed mines by means of reclamation and rehabilitation.

The author is Director, CRISIL Infrastructure Advisory. Divanshu, Guide, CRISIL Infrastructure Advisory, additionally contributed to the article