New Delhi: Two key bills received Parliament’s seal of approval on Friday when the Rajya Sabha passed legislation seeking to allow the auction of coal mines and other minerals, in a breakthrough for Prime Minister Narendra Modi ’s agenda of economic reforms.

The Mines and Minerals (Development and Regulation) Amendment Bill, 2015, and Coal Mines (Special Provisions) Bill, 2015, now require the President’s signature to enter the statute books, having received approval from the Lok Sabha earlier this month.

When they become law, they will set the stage for the auction of the next round of coal mines and other minerals such as iron ore, bauxite, zinc and lead.

Approval by the Upper House, in which the ruling National Democratic Alliance (NDA) is in a minority and where opposition parties have sought to block its legislative agenda, marks a victory for the 10-month-old government, which has also won Parliament’s nod for raising the cap on foreign investment in insurance.

“The new legislations will herald a new regime of competition, efficiency and transparency for key natural resources by fostering fair play through market forces," said Jyotsna Suri, president of the Federation of Indian Chambers of Commerce and Industry, a lobby group. “This will strengthen the reform agenda of the government and drive the economy to higher levels of growth. It is a strong boost to the confidence of investors, who have been looking for clarity and certainty in the policy regime."

After being approved by the Lok Sabha, the twin bills were sent to a Rajya Sabha select committee, which gave them the go-ahead. The Upper House’s approval came on the last day of the first part of the budget session of Parliament, which recesses for a month starting on Saturday.

Before the beginning of the session last month, the government had put the insurance bill, which sought to raise the foreign investment cap in joint ventures to 49% from 26%, and the coal and mines and minerals bills, along with the land acquisition legislation, at the top of its agenda in Parliament.

While it has managed three out of the four, opposition parties are expected to remain steadfast in their resistance to the amended land acquisition bill, which they say is anti-farmer. The proposed law seeks to make it easier for businesses to acquire land, in the process diluting safeguards for farmers, say critics.

“These are very important economic legislations which would go a long way in removing uncertainties in the metals and mining industry," said Debasish Mishra, senior director (consulting) at Deloitte Touche Tohmatsu India Pvt. Ltd.

The bills passed on Friday will enable the allocation of coal mines and other minerals through auction and sharing of benefit by miners. While the coal blocks are being auctioned by the central government, it is for the states to auction minerals such as iron ore. The Union government plans to help the states in preparing a template for the proposed mineral auctions.

“India has had a very bad track record of assigning resources. In terms of making it more transparent, auctions are less amenable to being manipulated," said Rajat Kathuria, director and chief executive at the Indian Council for Research on International Economic Relations, a think tank.

“There is a fear that auctions might lead to higher prices, but one of the new things in the coal bill is more money going to the states in line with the principle of cooperative federalism. So auctions, along with safeguarding special interests, are the right way forward," he said.

Two rounds of coal block auctions have already fetched the government ₹ 2.09 trillion from 33 blocks, giving credence to the national auditor’s claims that allocation of mines over the years had caused substantial losses to the national exchequer.

The money will accrue to the mineral-bearing states in the form of upfront payments, revenue and royalty. In addition, electricity consumers will get a tariff benefit of ₹ 96,971 crore.

“We reached out to the states to convince them of the benefits accruing to them once the auctions take place. They have been on board," a government official said on condition of anonymity.

Piyush Goyal, minister for coal, power and new and renewable energy, said the coal mines bill will help in the development of the mineral-rich eastern parts of the country.

The success of its auctions of coal mines and telecom spectrum have provided the government with ammunition to beat up the Congress, which, despite its rout in the Lok Sabha election last May, has, with the assistance of some allies, sought to block the legislative agenda of the NDA.

“The coal block auctions have also provided a case in the argument for the competitive bidding process to be adopted for mineral resources allocation," said Dipesh Dipu, partner at Hyderabad-based Jenissi Management Consultants. “While the details remain to be worked out, which may appropriately be adopted for different kinds of assets, the basic framework of auctioning in the scenario of growing demand for mineral resources is a step in the right direction."

The coal bill also has an enabling provision for commercial mining, which led to half-a-million coal miners walking off the job in January in the biggest show of union strength in recent years, bringing production and movement of coal across Asia’s third largest economy to a halt.

The power ministry, in a statement on Friday, said one of the objectives of the coal mines bill is “to take immediate action to auction or allot coal mines to minimize impact on core sectors such as steel, cement and power, which are vital for the development of the nation".

The coal auctions are to end the uncertainty that arose in September when the Supreme Court cancelled 204 coal-mining permits awarded to companies, terming their allotment arbitrary and illegal.

The government aims to auction or allot 110 coal mines. Of these, 65 are to be auctioned and 45 allotted to state-owned firms in a process to be completed before the end of the current fiscal year. The 110 mines up for grabs have around 350 million tonnes (mt) of reserves. Of these, 42 blocks with a production capacity of 90 mt are operational.

PTI reported that the mines ministry had already identified 199 mines that contain minerals such as iron ore, bauxite and manganese ore that can be auctioned. These are located in mineral-rich states such as Karnataka, Madhya Pradesh, Odisha, Gujarat and Maharashtra.

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