The draft Mineral (Auction) Second Amendment Rules, 2025 includes provisions to levy penalties as a percentage of the performance guarantee–paid by successful bidders to the government–for delaying the exploration activity beyond four months after getting the contract.
The aim is to accelerate production from mineral blocks to fully meet the domestic demand, especially for critical and heavy earth elements such as lithium, nickel, cobalt, silicon, copper, which are essential for solar panels, wind turbines, electric vehicles and energy storage systems.
India depends on the import of most critical minerals. According to data from the commerce ministry, in FY23 India imported 32,300 tonnes of four critical minerals: lithium, copper ores and concentrates, cobalt and nickel worth ₹6,550 crore. Of these, the country is import dependent for 93% for copper ores and concentrates and 100% for the other three.
“Introducing timelines is a step towards ensuring that mineral resources are brought to production in a timely manner. The rationale of such moves is to prevent locking up of mineral resources, which otherwise lie in the earth and are not being put to economic use,” said Rajnish Gupta, partner, tax and economic policy group at EY India.
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“Having said that, timeframes for development of a lease, even if there are no financial constraints, get impacted by location-specific factors such as environmental issues, evacuation and logistics infrastructure, etc,” said Gupta. “So timelines for development would vary by location and it is important that these are taken into consideration.”
Resources for critical and heavy earth minerals have been put up for exploration and mining for the first time after amendments to the Mines and Minerals (Development and Regulation) Act, 1957 last year.
India has already launched the National Critical Mineral Mission (NCMM) to ensure their long-term availability and processing. To get projects going quickly at address the shortage of these critical minerals in the country, it plans to introduce strict timelines.
Penalties for delays
According to the provisions added to the draft Mineral (Auction) Second Amendment Rules, 2025, a mining lease winner will get four months from the date of issuing the letter of intent (LoI) to submit a mining plan for approval. In case of any delay beyond this period, the miner would face a penalty equivalent to 5% of the performance guarantee security to be appropriated. After six months, 2% will be deducted for every month of delay. This would be treated as milestone 1 in the mining activity.
The performance security, a percentage of the value of estimated resources in a mineral block, is paid by a successful bidder to state governments.
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The ministry of mines has sought stakeholder comments on the draft rules by month-end.
These draft amendments are based on the recommendation of a committee constituted by the ministry. The panel included representatives from the ministries of mines and environment, forest and climate change, besides the state governments of Odisha, Karnataka and Madhya Pradesh and the Indian Bureau of Mines.
Environmental nod timelines
The draft rules also provide a separate timeline for securing environment clearance for projects and executing mining leases. A similar plan is being considered for holders of composite mineral leases, which were awarded for the first time last year after amending the mining act.
According to the draft rules, a delay of over 18 months from the completion of milestone 1 for securing environmental clearance would attract 5% deduction of performance security, and 2% per month after the dela extends beyond 22 months. This would second milestone.
A delay of 11 months but less than 14 months from milestone 2 would again attract a deduction of 5 % performance security; beyond 14 months, 2% will be charged for each month of delay.
Milestone 3 would require miners to complete land acquisition and get permission to draw water and power as part of executing the mineral lease.
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Similar timelines have been provided for awardees of composite licence–being issued for the first time in the country–and will involve both prospecting of resources and mining. The proposed regulations, however, have divided the timelines for a composite licence into six milestones spread over 81 months (6 years and 9 months).
The draft has also proposed that in cases where the preferred bidder or successful bidder is clearly identified for delays at various stages of mining, the state government would appropriate the performance security as provided in the regulations. The successful bidder would be required to top up performance security within two months of such appropriation.
New rules on auctions will help open mines and enhance production, given the increase in demand from end-use sectors, especially in critical minerals, said Rajib Maitra, partner at Deloitte India. “This will incentivize mining activities in the country.”
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Source:https://www.livemint.com/industry/critical-mineral-security-ev-energy-storage-solar-panels-odisha-auction-ey-india-infrastructure-lithium-mining-11747050978107.html