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New MMDR Bill huge fiscal burden on mining industry: Nik Senapati

Q&A with MD, Rio Tinto, India

Jayajit Dash  |  Bhubaneswar 

Rio Tinto's ambitious $1 billion iron ore mining project in Odisha has hardly showed any sign of taking off the ground. Moreover, its Indian partner- Odisha Mining Corporation (OMC) making it clear that it is no longer keen on the project. The global mining major, however, is not perturbed. Nik Senapati, Managing Director, Rio Tinto India, talks to Jayajit Dash on the jinxed project, the new and the company's future investment plans. Rio Tinto's $1 billion iron ore mining project in Odisha now seems shrouded in uncertainty after your Indian partner Odisha Mining Corporation (OMC) announced recently that it is no longer keen on the project. Is Rio still interested to pursue this project? What assurance have you got from your recent parleys with Odisha government officials?

The project, like any other sizeable and sustainable iron ore development, underpins the development of steel sector in the state. Our analysis displays by 2020, the eastern region would have 140-160 million tonne of steel capacity with nearly 60% being developed in Odisha. A good raw material supply (which requires proper exploration for ore delineation, beneficiation, blending, sizing etc) is essential, as in other steel making nations (South Korea, Japan, China), for steel-making to remain competitive. We see a business need with our competitive and technical advantages and the arrangements with OMC fit this purpose very well. We remain committed to the arrangements having negotiated with a government appointed task force. On the contrary, we have not heard from either the government or OMC a disinterest in the development, apart from their attention being diverted with more expedient issues on the state’s mineral regulations, which we believe are transient.

Earlier, differences had cropped up between Rio Tinto and OMC over exports of iron ore. Will Rio agree on an arrangement which bars export of the mined ore?

Rio Tinto will always observe and rigorously follow the law of the land, no matter where it operates. We are shy of being discriminated both from an upside or a downside perspective. We have neither requested fiscal concessions, preferential treatments and at the same count do not want impositions that are not applied to others. Having said that, we see steel growth in the local market. For that growth to be sustainable the Odisha steel players should be prepared to compete with the best, only then would Odisha have a sustainable industry that brings long term benefits and employment to our people

Mining activity in Odisha is presently at a low ebb after the state government suspended scores of mines operating without statutory clearances. There are also curbs planned on production and export of iron ore. In this backdrop, do you consider mining in Odisha to be a profitable proposition?

I would reserve further judgement until we can see the terms and analyse these.

What is your take on the new Mines and Minerals (Development & Regulation) MMDR Act-1957 of the Government of India? What expectations do you have from the legislation on joint ventures between global mining companies and their Indian counterparts?

There are many positive aspects to the new draft legislation. However, we believe that the new MMDR Act places an unduly high on mining in India, which we do not think is beneficial to the industry. This will make the industry uncompetitive with the global players and may also result in undesirable practices. Additionally, we think that the proposal for the auction route for prospecting licence and mining leases is unviable and will prevent potentially significant investments in exploration, which the country badly needs. The new Act as such does not have any impact on joint ventures between global mining companies and their Indian counterparts and so we do not think there would be any change in this regard.

5) Going ahead, what would be Rio Tinto's big plans for the India market? What is the scale of investment that the company is looking at in the next five years?

India is a large and growing market for our products. It also hosts a geological setting that is potentially attractive, however as it competes with other nations, from a legal and investment perspective, India should be encouraged to do a lot more to attract the mineral investment we believe it rightly deserves. We currently supply about $ 2 billion worth of commodities into India and we envisage a growth trajectory in the future, it’s an important business to us. From an investment perspective, it’s difficult to predict and will be dependent on our successes as an explorer, the desire of states to encourage mineral investments and our ability to secure approvals. Rio Tinto has successfully found and is currently developing a diamond mine in Madhya Pradesh (MP) with a likely development cost of $ 500 million. The mine is a first diamond deposit discovery in 10 years, globally

Is Rio Tinto looking at the possibility of having a joint venture with state run National Mineral Development Corporation (NMDC) for iron ore mining?

- NMDC and Rio Tinto enjoy a long relationship of peers. NMDC is a partner in the Odisha project. We discuss potential opportunities which are not restricted to iron ore nor restricted to India.

Rio Tinto is also well known for its interest in diamond business in India. Can you elaborate a bit on your current activities and also your plans for the future?

Rio Tinto’s Bunder in Madhya Pradesh is the first diamond discovery in India in more than four decades. Discovered by Rio Tinto in 2004, economic viability studies have shown that an open pit mine could operate at a production rate that would put Madhya Pradesh (and India) in the top ten diamond producing regions in the world.

For the past eight years, we have been working on the ground with the vision to set a new benchmark for mine development in India. We have been working closely with the local communities on environmental sustainability, education development and other projects such as women’s empowerment, drinking water access and agriculture improvements.

Pre-feasibility of the Bunder project commenced in July 2010 and will take approximately three years to complete. This work includes geological, engineering, environmental and social impact and workforce development studies.

The mining lease approval process is also underway and requires the submission of a mine plan in conjunction with forest and environment clearances.

We are looking at the first commercial production from the Bunder project around 2017. We have analysed the prospecting samples to date and earlier this year we began cutting and polishing tests to further understand the nature of the Bunder production. Although it is early days yet, the Bunder diamonds sampled to date are quite unique and the beautiful array of colours, shapes and sizes will provide us with an exciting new product offering. The presence of fancy colours such as the champagne and cognacs diamonds is exciting as we have successfully created a market for these diamonds with the Argyle production and the strong support of the Indian diamond industry.

First Published: Thu, December 06 2012. 15:04 IST