State-Owned Coal Producer has been Asked to Cough Up

As Coal India Drowns Under Fines for Illegal Mining, What Will the Modi Govt Do?

Piyush Goyal‘s reign at the mines ministry has left behind a troubling legacy for Coal India (CIL).

The state-owned coal producer has been asked to cough up Rs 41,000 crore in fines, more than Rs 38,000 crore it has in cash reserves, thanks to a retrospective change in the definition of “illegal mining” made by the Supreme Court on the basis of an affidavit submitted by the mines ministry in January 2017.

Only Odisha and Jharkhand have so far imposed penalty on CIL for illegal mining. The figure could rise when other states slap fines on the public sector coal producer.

The reinterpretation of Section 21(5) of the Mine and Minerals (Development and Regulation), or MMDR, Act, which deals with illegal mining and whose ambit was earlier limited to mining activities carried outside lease area, now also includes violation of environmental laws within the mining area.

Earlier, any violation of the Environmental Protection Act (EPA) or the Forest Conservation Act (FCA), was dealt with under those laws and not as per Section 21 (5) of the MMDR Act.

Apart from CIL and its subsidiaries, private mines in Odisha have been hit hard by the retrospective change in the definition of illegal mining. Significantly, Odisha has a non-BJP government and miners play a key role in political financing in the state. According to industry sources, one theory doing the rounds in political circles is that the affidavit was submitted by the mines ministry to choke political funding to the ruling BJD.

Private players have been fined Rs 19,200 crore in Odisha since the apex court judgment last August. Goyal had held charge of the mines ministry between July 6, 2016 and September 4, 2017 when Narendra Singh Tomar was away for electioneering.

But now that fears have arisen that heavy penalties could disrupt mining activities, adversely affecting availability of major minerals in the country, the Modi government seems to have been caught in its own trap and is looking to remedy the situation.

Sources said the government is planning to bring an amendment to the MMDR Act to protect miners. The draft legislation will be put up before the Union cabinet soon.

Section 21(5) of the MMDR Act reads, “Whenever any person raises, without any lawful authority, any mineral from any land, the state government may recover from such person the mineral so raised, or, where such mineral has already been disposed of, the price thereof, and may also recover from such person, rent, royalty or tax, as the case may be, for the period during which the land was occupied by such person without any lawful authority.”

There is lack of clarity on whether the Act should deal with violations in environment norms, which are dealt by separate laws. When mining has been carried within the permitted mining lease area, it cannot be termed illegal, a government said, reflecting the dominant thinking within the government on the issue.

Any change in a legislation is applicable from the date the law has come into force. So, the amendment will have retrospective impact, said another official.

Sources said the Odisha government has collected about Rs 12,000 crore in fines from defaulting mining companies operating. About 50 mining leaseholders are yet to pay the penalties. The state has also decided to confiscate property of mining leaseholders who fail to pay their dues.

Mahanadi Coalfields Ltd (MCL), CIL’s Odisha-headquartered subsidiary, has been fined Rs 8,300 crore by the state government.

MCL has responded to the notice, saying the SC verdict applies to iron ore and manganese mines only.

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