26 % Mining Profit to Locals

Under the proposed law, miners would have to pay an amount equal to the royalty they need to pay to the government to help create a fund for the welfare of project-displaced people. In the case of coal miners, the amount will be 26% of profits from the projects.

The bill proposes to give automatic mining approvals once a discovery is made after prospecting, mining ministry officials said. Currently, miners need separate approvals for surveying deposits, prospecting and mining.

It also proposes to free state governments from taking the federal government's approval for granting mining leases.

The bill will be introduced in parliament in the next session in December and will need its approval before it can become law.

The bill has been pending for more than two years as it got caught time and again in a crossfire of objections, mainly over profit sharing and royalties.

Miners aren't convinced the proposed law will attract higher investments, especially because of the requirement to pay more royalties.

"The doubling of royalty payments will make it unattractive for the private sector to invest in mining," said R. K Sharma, secretary general of the Federation of Indian Mineral Industries. "Unless you are able to attract investors, how will you develop mines and the local area?"

Shares of mining companies fell after the cabinet cleared the draft.

The government believes the proposed law will boost investments.

The aim is to create a better legislative environment for attracting investment and technology into mining, Mines Minister Dinsha Patel said.

The rules on supporting the welfare of local people will also apply to companies that own mines just for meeting their exclusive raw-material requirements.

Under the proposals, mining leases will be freely transferable.

Mining leases will mostly be granted through competitive bidding, but some preference may be given to state-run companies whenever they face a resource crunch, according to officials.