A big development in this past week was the government through the Department of Geology and Mines, Ministry of Economic Affairs signing a 15-year lease with the State Mining Corporation Limited (SMCL) for the Chunaikhola Dolomite Mine and the Khothakpa Gypsum Mine.
During the lease period, the SMCL shall pay License Fees of Nu. 3 billion (Nu. 200 million per annum) for Chunaikhola Dolomite Mine and Nu. 1.125 billion (Nu. 75.00 million per annum) for Khothakpa Gypsum Mine to the Royal Government.
The MoEA Minister Lyonpo Loknath Sharma said that the government had done this to fulfill its main manifesto promise of ‘narrowing the gap,’ and also help meet the revenue gaps.
He acknowledged that initially the government had planned to auction the Chunaikhola Dolomite Mine, but given the pandemic it was felt that it is not the right time to auction the mine and even if it was, the new lease holder would not be able to export much.
He also said that there had been two views within the cabinet on auctioning it and on giving it to SMCL and he said the final decision of the cabinet was to hand over both the mines to SMCL for 15 years.
Lyonpo said that during the pandemic time the government revenue is going down and even though a private company would have bid, the amount would be spread over 15 years.
He said in the case of SMCL they would only retain the cost but everything else would come to the government. He said this would also be a redistribution of wealth.
Lyonpo said that the only thing that prevented the government from giving the mines to SMCL was the Mines and Minerals Management Regulations 2002 where it says any pre-identified mines must be tendered out.
He said this was changed in the new updated Minerals Management Regulations 2022 where new rules were put in place empowering the government to hand over mines directly to the SMCL on lease. The rules could be changed as it did not clash with the existing Mines and Minerals Management Act of Bhutan 1995.
Lyonpo said that in 2019 the private lease on the Gypsum Mines was over and there was some possibility of its expansion. However, instead of directly auctioning the government handed over the mine to the SMCL to run.
He said that similarly in the case of coal when the lease of SD Eastern in the Rishore mines ended it was handed over to SMCL which was already working on two coal mines nearby.
The minister said that the SMCL will be able to assess the exact prices for the minerals and he said secondly the SMCL under a corporate structure like DHI is not like the old SOEs in the past that failed in mining operations and so SMCL can prove itself now.
On if the above decision meant that the government had decided to follow the National Council’s recommendation to nationalize all mines the minister said that it is not the case.
He said there are other mines like lime stone, marble etc and moreover captive mines for industries are still there.
He said in the MoU signed with SMCL is it made clear that SMCL will supply the raw dolomite needed for value addition by private companies.
Lyonpo said that in the event that SMCL cannot perform to meet demand or supply raw materials to private companies then the government will have the option of opening up other dolomite mines, but for now that is not an issue.
He said that it would also be too late to wait for the Mining Bill which has been deferred and it could be another two years before it comes up again.
In 30 January 2020 the National Assembly passed the Mines and Mineral Bill of Bhutan 2020 along with amendments with 49 percent public ownership, 20-year lease period, 30 percent employment of local community, 10 percent of Royalty for the local community etc. It allowed a mixed mode of auctions with provision to also grant mines to the SOEs.
The Bill underwent major changes in the National Council which has always held the position that all mines should be nationalized as they belong to the state under the Constitution.
The NA did not agree to the changes of the NC and the two houses formed a joint committee that could not resolve the major differences. Then in June 2021 the Speaker controversially deferred the Bill without a vote and shortened discussion time.
The Prime Minister himself has always been on the fence neither siding with those in his government who wanted auctions and also not going for the nationalization argument of the NC, but in the end decided to hand over these two large mines to the SMCL.