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Can the PM's go-to man Piyush Goyal solve the mines and minerals riddle?

Piyush Goyal, the new mine and minerals minister, has a tough job on his hand. Right now, the sector is in a complete mess, marred with cases that have gone right up to the apex court - from double taxation to banning exports of ores to allegations of under-pricing by PSUs

twitter-logoAnilesh S Mahajan | July 15, 2016 | Updated 16:43 IST

Anilesh S Mahajan, Associate Editor, Business Today
Piyush Goyal, the new mine and minerals minister, has a tough job on his hand. Right now, the sector is in a complete mess, marred with cases that have gone right up to the apex court - from double taxation to banning exports of ores to allegations of under-pricing by PSUs. To add to the complications, the Union government is forcing the states to undergo reforms and adopt transparent methods of reverse bids.

Goyal's predecessor, Narendra Tomar, was helped by the floor management of his party colleagues in getting the ruling parties in the mining states of Odisha, West Bengal and Telangana to back the amendments in the Mines and Minerals Act, and abolish discretionary powers of the Centre and the states, but he was unable to execute the reforms.

In 13 months of reforms, only seven mines went under the hammer. This could also be because the demand for commodities was down globally, but many states were also sweating to reach the standards set post amendments. Unlike power or coal, where the Union government has a role, mines and minerals are largely state subjects. The Union government and ministry could at best assist states.

In the last reshuffle, Goyal was expected to be elevated to Cabinet minister rank, but apparently he could not fit into the regional and caste equations. He comes from Maharashtra, a state that already has leaders like Nitin Gadkari and Anant Geete, along with Suresh Prabhu and Prakash Javadekar (who belong to Maharashtra but represent Andhra Pradesh and Madhya Pradesh, respectively), along with three other ministers of state. But Goyal got mines and minerals instead, along with his existing portfolio of power, coal & renewable energy - ministries that contribute about 3.8 per cent of the country's GDP.

His task also requires sensitive handling when it comes to taking state governments along, especially Naveen Patnaik's Odisha, J Jayalalithaa's Tamil Nadu, and Siddaramaiah's Karnataka governments. He will have to work with these states to clear pending lease renewal cases. Companies, on the other hand, expect him to streamline the taxation system and reduce the states' and Centre's 'arbitrary and frequent' changes. Goyal's target to the mines and mineral ministry is to increase the contribution to GDP by another 1 per cent in next two years.

The job assigned is not easy. Tomar was in the last leg of finalising the new National Mineral Exploration Policy (NMEP), which may require some rework from Goyal. Before seeking private investments in this sector, Goyal is trying to bring in transparency to build the confidence of miners and prospective investors. In his first meeting at his new office, he directed officers to scrap the execution plan for the development of an online interface between mine owners, the Centre and the states. This was in the works for six years. His argument is that something that was initiated six years ago might have become technologically redundant by now. His commitment is to still bring in this interface, but within one month. This interface is the first step towards a more agile and transparent system, where he will have to ensure every query is available on the website, including timelines for response to those queries.

The biggest task in front of Goyal is to implement the e-auction to kick-start growth in mining. Miners are resisting this change, and many states too need more coaxing to come on board. The challenges in front of the states range from the size of the mines, to taxation, to legal complications as many of the miners have moved courts, to challenges of land acquisition, to cap on iron ore mining, among others.

The investors in the sector, such as Vedanta Resources, POSCO, JSPL, JSW, and Tata Steel expect Goyal to understand the processes, complexities, enhance inter-ministerial and Centre-state communications to kick-start this sector. This includes the issue of double taxation in states like Goa. The matter is pending with the apex court. Other than this, the industry has knocked on the doors of Karnataka High Court, alleging that PSU NMDC is undercutting the price of ore and killing the market. The court has asked the ministry to resolve the issue. Mining in Karnataka is embroiled in major scams. So, it is not surprising that Goyal is pushing for e-auction -something he has executed successfully in his other ministries.

Speed, however, is of the essence. For example, in the past 13 months, Tomar could not convince states to start the District Mineral Foundation -made mandatory post amendments to the mines and minerals act. This foundation is expected to have a corpus of Rs 6,000 crore, and would be spent in districts where mining happens. These areas are largely either tribal, forest or naxal impacted.

Here companies are pushing for reducing the royalty on iron ore, among others, from the existing 15 per cent to the global standard of 3-7 per cent, but states are obviously unwilling to negotiate. Can he find a middle path? Goyal, in his role as coal and power minister, managed to take several state governments along. He has already indicated that he would be working more closely with them.

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