International Joint Ventures and Merger & Acquisitions

Indian Government Encourages Private Sector Participation in Non-Coal Mineral Blocks Exploration

September 04, 2018

India is well endowed in terms of minerals and has incredible potential in the mining sector. With the development and evolution, the demand for commodities has persistently

India is well endowed in terms of minerals and has incredible potential in the mining sector. With the development and evolution, the demand for commodities has persistently increased while the supply has remained limited and constrained. This amplified the demand- supply gap leading to increased import costs.

To ensure the success of “Make in India” initiative, it is vital to grow the mining sector of the country with more focus on non-coal and non-fuel resource exploration. According to the Geological Survey of India (GSI), out of the 31.4 lakh sq km of our country’s mapable area, about 5.71 lakh sq km has been identified for scheduled mining of the non-fuel and non-coal major minerals. Currently, only 4,550 sq km has been leased for mining across India which excludes fuel, atomic or minor minerals.

To bring India on the growth path, it is necessary to pace up the non-coal exploration process and position India onto its true mining potential. Focusing on the same, the mines ministry has proposed private companies to participate in the exploration of non-coal mineral blocks. The exploration process should double each year and to materialize it Bipul Pathak, Mines Joint Secretary said “ The government will be also allocating some money specifically for certain category of private sector participants so that the activity of exploration percolates to the private sector in India”.

During the National Summit on Mineral Exploration and Sustainability, Bipul Pathak mentioned that "In my opinion at least the activity (exploration) should double every year now," but "there is a limit to what government agencies can do". The only way to boost the exploration is the entry of the private sector in the exploration activity. The government is also trying to bring every level of private participant in the exploration sector from all over the world to come and work in India.

The government is planning to globalize its efforts by inviting junior exploration companies to develop the exploration projects and access the funding under the NMET (National Mineral Exploration Trust) scheme. In order to catch the attention of private investments including foreign direct investment (FDI) into the mineral exploration sector, government has created a new National Mineral Exploration Policy (NEMP) with various incentives for explorers, including a risk cover.

Under the new NEMP policy, the mining ministry will auction off 100 non-coal and non-fuel blocks to private explorers in the next nine months on a revenue-sharing basis. In the cases where the exploration leads to auction-able resources, the data created by the company will be shared with potential end users/ developers. They will be given the mining rights through a competitive bidding process. After the selection, the developer is expected to pay a part of their incomes as royalty to exploration companies for the entire lease period of 50 years.

Mineral exploration is an extremely high-risk venture. To ease the process of exploration, the government has decided to provide the pre-competitive baseline geo-scientific data of the highest standards in the public domain free of charge. The government will also conduct an aero-geophysical survey of India in a mission mode. In the beginning, it will cover 8 lakh sq km of ‘potential’ exploration areas, and afterward, move on to cover rest of the areas. All the data collected by various central and state agencies on baseline and mineral exploration would be assembled into a digital geospatial database known as the National Geoscientific Data Repository (NGDR).

This strategy of government might attract the attention of advanced exploration firms which has prime focus on exploration only rather than mining. Narendra Singh Tomar, mines minister said, “The exploration sector has been largely untapped in the country. Only 10 per cent of the 8 lakh sq km potentially resource-bearing area has been explored. The policy will help attract private sector and FDI”.

Also, to reduce the risk factor and ensure profitability & viability of the project for the explorer, the exploration expenditure will be reimbursed on normative cost basis in case the exploration agencies do not discover any auction-able resource. Moreover, once the exploration work is over, states will take back the mineral blocks from the explorer agencies.
The introduction of private companies in the mining industry can propel the economy of the country by creating employment and reducing import costs. Each mine employs hundreds of skilled and unskilled laborers, so this new mining policy is expected to create at least 60 lakh new jobs by 2025. The full mapping of the mineral deposits by government would encourage the potential investors. Ecologically, it would guarantee the maximum environmental protection.

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