When the M B Shah Commission was set up in November 2010 by the Ministry of Mines, perhaps no one imagined the depths to which it would go in its work. The Commission's findings are not about the human impact of iron ore and manganese mining, or on narratives of biodiversity and ecological loss. Instead, over the last two years the Commission has, through its reports, legally interpreted regulatory frameworks, articulated reasons behind rampant illegal mining, and specified measures through which it can be checked. The Commission is said to have submitted its final report in mid-October, just before its term ended on 16 October 2013.

Why was the Commission wound up even before it was able to complete visits to three of the seven states where iron ore mining takes place? This is an issue that calls for separate scrutiny. For the present, we can attempt to unravel the interpretations and the approach which form the basis of its recommendations. The final report of the Commission is currently not in public domain, but its approach and recommendations so far can clearly give us a sense of what the final report would contain. News reports highlight that the final report has elaborated on financial transactions and losses to the national exchequer from illegal mining (between 2006-2011) apart from recommending a ban in iron ore and manganese exports. (See this link).

The interim report, dated 14 July 2011, relied substantially on more than the commission's own investigations, including the 19th Report submitted by the Parliament Standing Committee on Coal & Steel (2005.2006) for deemed extension (of mining leases), and also the Lokayukta investigation and report under Section 7(2A) of Karnataka Lokayukta Act, 1984. The two reports of the Central Empowered Committee (CEC, set up by the Supreme Court in 2002 as part of the of T N Godavarman case, or what is popularly known as the 'forest case'] on illegal mining in Andhra Pradesh, Karnataka and Odisha were also referred to.

MMDRA legislation and mineral conservation

One of the ighlights of the interim report is the approach to conservation, preservation and systematic development of minerals through the clauses of the Minerals Development and Regulation Act, 1957. While the Shah Commission acknowledges that iron and steel is critical for industrial development in a country, it seeks to conserve (preserve) and develop these minerals for future generations and for future requirements of developing industries in India.

The Mines & Minerals (Development & Regulation) Act (MMDRA), 1957 in its early sections highlights that the regulation of mines and the development of minerals will be looked at by the central government in public interest. The Shah Commission's Interim Report reads this with Section 18 (1) of the law which says very clearly that "it shall be the duty of the Central Government to take all such steps as may be necessary for the conservation and systematic development of minerals in India and for the protection of environment by preventing or controlling any pollution which may be caused by prospecting or mining operations and for such purposes the Central Government may, by notification in the Official Gazette, make such rules as it thinks fit."

While the Commission acknowledges that iron and steel is critical for industrial development in a country, it seeks to conserve and develop these minerals for future generations and future requirements of developing industries.

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The Commission's interim report relied on several dictionary and documented meanings of the words "conservation" and "conserve". The Commission thus concluded that the word "conservation" in the context of Section 18 of the Act would mean "preservation; careful and planned management of natural resources and to protect from harm or overuse of minerals."

The Shah commission also relied on the Supreme Court's observations in Civil Appeals Nos. 2602-2604 of 1980 related to the state of Tamil Nadu to bolster its point. The SC had said that "in the case of a scarce mineral, to permit exploitation by the State or its agency and to prohibit exploitation by private agencies is the most effective method of conservation and prudent exploitation. If you want to conserve for the future, you must prohibit in the present."

According to the commission's interim findings, illegal mining (which impedes conservation and preservation) arises because relevant provisions of the MMDRA and related Rules, which empower the Central Government and State Government Officers to enter and inspect mines, are misused. There are no proper check posts and computerized weigh bridges; where they do exist, they are not properly manned and functional, says the Commission. Issues related to control of mafia and high export prices (particularly from China) also impact the iron ore and manganese sector.

The Shah commission interim report put substantial responsibility on the Indian Bureau of Mines (IBM) for not taking up timely checks and cited many instances where it has been observed that boundary markings of the leased-out area are not clearly defined. The same is also true for the forest boundary pillar markings. This is a critical issue which has also been pointed out in the CEC reports mentioned above, where several instances of encroachment beyond approved mine lease areas were recorded.

The commission recommended amendments to the Mineral Concession Rules, 1960 wherein if mine owners are caught encroaching or shifting boundaries, then their license/lease can come under a cloud. Similarly, if such illegalities are found at the time of verification by the State Government (including through reports of the IBM), prior to approving renewals of mining lease, the applications can be rejected.

Delays, deemed approvals and forest clearances

The Commission's report makes an interesting observation when it says that one of the reasons that illegal mining thrives is the lack of timely renewals for mining. The responsibility is on the mine owners, who don't apply in time, and also on the various regulatory authorities where the applications are not processed in time. There is substantial discussion on the legal clauses in the Mineral Concession Rules which allow for deemed approval in case the mine owners don't receive a response from the approving authorities before the lease expires.

While relying on the observations of the Standing Committee on Coal and Steel (2006.07), the commission reiterated that "timely disposal of mining lease application is in the overall interest of mineral exploration and any delay in this regard could be interpreted as encouragement to the menace of illegal mining." Therefore steps should be taken to streamline procedures to minimize delays.

This needs to be read in the light of one of the observations of the CEC highlighted in detail in the commission's report, which brought out the fact that several mines in the states of Andhra Pradesh, Karnataka and Odisha were operating without requisite environment and forest approvals from the Ministry of Environment and Forests (MoEF). Shah Commission's other report, specifically on iron ore mining in Goa, also emphasises this substantially.

As per law, mine owners need to apply for renewal of mining leases twelve months before they expire. The amendments to the relevant Mineral Concession Rules, suggested by the Shah Commission, state that at the time of applying for renewal, the mine owner should simultaneously re-apply for related forest and pollution clearances to the state forest department and the state pollution control board. This is because the grant of such environmental approvals are only for the period over which the mining leases are valid.

There has been extensive debate on this in the Supreme Court's forest case, where it was pointed out that even after the mine lease has been renewed, the forest related approvals often remain pending. More often than not, this is because there are either illegalities involved or a mine owner has not applied in time.

When it came to the deemed extension clause, the commission had suggested a time limit, advising that such deemed extension be valid only for a period of a year or till such time the state government has responded to renewal application, whichever is earlier. This gives one two years for the renewal to be processed, which, according to the Commission report, is more than sufficient.

Domestic consumption and ban on exports

In its findings and observations, the Shah Commission's interim report had emphasized clearly that the domestic steel industry in the country requires "more and more" iron ore for manufacturing steel and steel products. Further, a number of Indian industrialists can develop a technique for using iron ore for manufacturing steel and steel products within the country. The commission while referring to MoUs between industrialists and the State of Karnataka stressed that India must have a clear strategy for the next 20-25 years for mineral resources to be augmented. This would require systematic exploration and excavation of iron ore through scientific methods of mining, beneficiation and economic utilization.

The Commission is of the view that export of iron ore needs to be banned for its preservation. The report took the view that "iron ore fines is primarily exported and lumps ore is consumed domestically." The Commission was of the opinion that the blanket ban on exports may lead to the drop in price and will therefore also reduce illegal mining. What this would also result in is the transfer of surplus iron ore from mine owners to the consumer industries. While there may be some initial problem, such a ban may finally result the developing technology by which iron ore fines can be used by the domestic industrialists in the next few years.

Response of the Ministry of Mines

Not all recommendations of the Shah Commission's interim report were accepted by the Ministry of Mines. The relevant Action Taken Reports on the Ministry of Mines website reveal more details. The Ministry states that while it agrees to the proposal for simultaneous applications for forest and pollution related clearances, these are not amendments that can be made in the mining regulations. Such a directive or amendment should emerge in the forest and pollution related laws under the jurisdiction of the MoEF.

On the second recommendation of the validity of deemed approval being only a year, the Ministry of Mines disagreed with the Shah commission's recommendation. According to the Ministry, this rule was in existence back in 1987 and was amended in 1991 and to do what the Commission seeks would imply going back to the earlier provision. This change they say, "would encourage corruption, enabling the use of threat of delay to gain undue pecuniary advantages. For a miner the cost of shutting down a mining operation and restarting it would be a major disincentive, and will push him to corruption." So, while the state government has the right to reject the renewal, the deemed approval clause would push the government to take a decision in time and avoid unnecessary penalty on a miner.

The Shah Commission had also recommended that a new provision be added in the Rules enabling the State Government to reject an application for renewal of mining lease by any person convicted of illegal mining. While agreeing with this provision, the Ministry of Mines has said that this aspect has already been provided for in the MMDR Bill, 2011, approved by the government on 30 September 2011. Under the latter, any person convicted of illegal mining would stand to lose not only his existing mineral concessions but also be debarred from obtaining any concessions in the future.

Another recommendation to check illegal mining related to the functioning of the IBM and called upon personnel from the Bureau to visit a mine at least once a month. Further, it held that the concerned officer would be held accountable for any wrong reporting, including any related to the boundary pillars of the mine. This has been accepted by the ministry subject to "practical" considerations.

On the larger issue of a ban on iron ore exports, the Ministry of Mines says that this is under the jurisdiction of the Ministry of Commerce and mining laws cannot determine this. They are, however, of the opinion that it is not exports, but lack of governance at state government levels which has largely contributed to illegal mining. The Ministry is of the view that a ban on export of iron ore may not be feasible.

The M B Shah Commission report is to be tabled in Parliament in the next six months. It is likely that the report has emphasized its earlier position which states that prohibition in the present is necessary to conserve iron and manganese deposits for the future. Meanwhile, several industry associations have objected to the ban on exports and the Supreme Court (SC) total ban on mining in Goa, consequent to the Shah Commission's findings being contested at various levels.

The Commission's process of enquiry and preliminary findings have already created ripples and have had significant judicial and policy implications. Whether or not one agrees with the recommendations of the commission, it cannot be denied it has done a huge task of exposing the nature of illegal mining and corruption in the iron ore sector which can no longer be ignored either by the government or mining proponents. The next few months and decisions around the commission's final findings would surely be something to look out for.