Recognising its urgency, the National Assembly’s economic and finance committee is making efforts to table the Mines and Minerals Bill 2020 as an urgent Bill in the winter session.
The mines and minerals sector has been recognised as one of the five economic jewels because of its potential for revenue and job creation. But the government has not issued new mining and quarrying licenses since 2013 for want of a new Act.
The last session of the National Assembly had deferred the Bill, saying that it was too important to be rushed through. The committee needs the consensus of the Speaker and the National Council Chairperson to table it as an urgent Bill.
The 13-member economic and finance committee is currently weighing the modality options of mining operations. Speaking at a consultation meeting in Thimphu on July 31, a member of the committee, MP Dorji Wangdi, said, “We are trying to table it as an urgent Bill.”
Nationalisation of the mining and quarrying sector is one of the recommendations the committee has received from stakeholders. However, most committee members want a balance between the capitalistic and socialistic modalities.
The Bill states that a mineral reserve should be allocated through competitive bidding process or to a state-owned enterprise (SOE).
MP Dorji Wangdi said that whether a mineral should be explored by a private company or the state should be based on whether it is strategic or non-strategic. “We should adopt a model that is in line with the country’s policies.”
The Bill defines strategic minerals as the ones that are in short supply and essential for domestic industries, or are rare and have high values. A strategic mineral will also include minerals with security implication.
However, representatives from the private mining sector said what constitute strategic minerals should be listed. “Otherwise, there are chances that the private sector will not be allowed to collect even sand saying that it is a strategic mineral,” a representative said.
MP Dorji Wangdi said that the scope of profitability, job creation and environment degradation should also be considered while deciding on who gets the lease of a mineral site. According to him, SOEs performed better in terms of providing employment, while private players did better when it came to maximizing profits.
Another member of the committee, MP Passang Dorji (PhD), said neither nationalization nor the capitalistic way of mining was a good model for Bhutan.
“We cannot please everybody when we come up with a law,” he said.
A private mine owner, Rinzin Dorji, said that the mining sector should be open to the private sector if the country has to achieve self-reliance. Through private participation, he said the country was benefiting in taxes and employment generation.
Rinzin Dorji said that although the maximum lease life of a mine is 30 years, the lessee needed to obtain environment clearance every 10 years and that if the clearance was not given the owner would lose its investment.
“Sometimes, a lessee may not get the clearance renewed due to objections from locals. Because of such issues, mining companies incur loses,” he said.
The mining and quarrying sector, according to a National Council study, is benefiting only a handful of individuals. The government believes that proper regulation would enhance country’s revenue and narrow the gap between rich and poor.
However, representative of Jigme Mining Corporation Limited said that government was benefiting without having to invest. Citing an example, he said the Natural Resources Development Corporation Limited (NRDCL) sold huge equipment at 50 percent of its cost price after it failed to compete with the private sector.
He said that the government’s role should be that of a regulator. “When these government companies fail, who will bear the losses? These risks can be offset to the private sector,” he said.
He said the government should consider private investment even if the profits from SOEs are bigger than the revenue from the private sector. “If the State Mining Corporation (SMC) pays Nu 100 billion as profit to the state, a certain amount of investment has to happen,” he said.
Committee Chairman MP Kinley Wangchuk said that the MPs as representatives of people would look at all the sides of the arguments to come to a conclusion. “We are the bridge between the people and the government. We have to make sure that the law is fair for all stakeholders,” he said.
Scope of the Mines and Minerals Bill
As one of the new features, the Bill proposes for a progressive fiscal instrument to extract a proportionate share of the benefit from mineral as revenue to the government through royalty.
This means that the government will levy a certain amount of charges in addition to the regular rent and royalty. This fiscal regime will be developed by the Ministry of Finance.
The Bill states that the lessee shall provide preference to eligible affected community for employment opportunities and procurement of goods and services.
The affected community shall be granted priority to buy equity stake in the mining company.
Affected community shall be compensated through benefit-sharing scheme as prescribed, as per the Bill.
The communities shall have access to social infrastructure developed by the lessee and other infrastructures such as medical facilities, road and water supply.
A mining lease may be renewed for the expected economic life of the mine or a maximum of 30 years, whichever is less.
The Bill states that a person shall add value on the mineral before export where it is technically and economically viable.