Cabinet approves mining bill; Coal India,Tata Steel tank

The Cabinet approved on Friday a bill calling for coal miners to share a maximum 26 percent of their profits with local communities and for other miners an amount equivalent to royalties, a government minister said.

The bill now requires parliamentary approval to become law and is seen as a major move towards reform. The Mines & Minerals (Regulation and Development) Bill, 2011, which seeks to replace a 1957 act, also provides for setting up of National Mining Regulatory Authority and Tribunal and formation of District Mineral Foundations in 60 mineral-rich districts across the country.

The states will also be advised to set up authorities and tribunals on these lines. The Bill, which advocates “sustainable and scientific” mining, also suggests non-coal miners like bauxite and iron ore firms to share an amount equal to that of royalty with local residents instead of just sharing profits.

The bill had initially suggested all coal miners give 26 percent of profits to local communities. Companies mining other resources, meanwhile, would be required to pay a 100 percent royalty on their production to the local population.

The draft law proposes the profit sharing formula in a bid to smooth land acquisition, a touchy issue in the countryside, where many oppose natural resources being carted away by outsiders.

As cost of production gets higher, mining companies will be forced to pass on the extra cost to final users.

The key Indian equity indices have reversed the intraday rebound and have turned lower in the early afternoon trade. Shares of Metals and Mining companies are under some pressure after the Union Cabinet approved the new Mining Bill that calls for them to share profit and royalty with the local community.

Metal producing companies like Tata Steel and Hindalco have taken a sharp fall. Both the stocks are trading nearly 2 percent lower.

Even mining companies are falling, especially Coal India, which will be hit the most as it will have to share one fourth of its profit, which means lesser money for growth and dividends. Coal India is trading at a low of Rs 334, down 4 percent.

According to coal minister Prakash Jaiswal, the new bill would speed the approval of land clearances - something that both foreign and domestic investors have long complained about in India.Moreover, he insisted that the new bill will not impact the revenues of coal companies in the long-term.

An estimated Rs 10,000 crore will be generated per year from the miners and an average amount of Rs 180 to Rs 200 crore will be distributed among District Mining Foundations of 60 mineral rich districts that include 25 districts affected by Left Wing Extremism.

The bill is expected to be introduced in the Winter Session of Parliament.

With inputs from agencies