Skewed policy keeps foreign miners away from exploration in India

Lack of enabling provisions and some restrictive conditions in the policy are reasons behind it

Lack of enabling provisions and some restrictive conditions in the country's National Mineral Exploration Policy (NMEP) appear to be keeping foreign mining majors away from India.

No mining or exploration company from abroad is on the approved list of the National Mineral Exploration Trust, despite the fact that it had floated an expression of interest for the selection of such companies.

The Federation of Indian Mineral Industries (Fimi) blames this situation on some restrictive provisions in the Mineral (Non-Exclusive Reconnaissance Permits) Rules, 2015.

According to these rules, the holder of a non-exclusive reconnaissance permit (NERP) cannot stake a claim for the grant of any composite licence or mining lease. Besides, grant of an NERP cannot restrain any state government from notifying the entire area, or part of such area, for grant of a mining lease or composite licence. If there is such a notification, the NERP would get terminated automatically.

"With such rules in place, no private company or foreign direct investment (FDI) will come for exploration. This is not the practice in other resource-rich nations, where exploration companies have more flexibility," said R K Sharma, secretary-general of Fimi.

The body suggests the following measures as a remedy to this situation

1. Allow seamless conversion of NERPs into a mining licence or composite licence and freedom to sell this to any buyer

2. Grant autonomy to an NERP holder to enter into a joint venture or partnership with anybody along with the security of tenure.

3. Provide for renewal of the lease if a mineral is still available in the deposit.

4. After the issue of an NERP in favour of a party, no area within this ambit can be auctioned by the government.

A report titled 'Indian mineral exploration' by consultancy EY India says, traditionally, most mining countries have adopted a 'first-come-first-served' principle in granting exploration rights. With provision for automatic transfer from a prospecting to a mining lease.

To address the best exploration talent available globally, the report suggests the government address issues such as availability of risk capital for exploration, balanced scope and deliverables from explorers, the risk-reward equation through a revenue-sharing mechanism, impact of economic cycles, exploration in existing areas, adequacy of budget allocation and supportive taxation.

India has not been a favoured mineral exploration destination for global companies. It gets only 0.6 per cent of the global exploration budget, compared to 14 per cent in Canada and 12 per cent in Australia. The country's exploration expenditure is estimated at around $17 a sq km as against China's at $56 and Brazil's at $35.

India is also among the least explored countries in the world, with a budget of only $15 million a yaer in 2016, as against $960 million for Canada and $900 million in Australia. There is hardly any foreign direct investment (FDI) in the mining sector, though it was opened up for 100 per cent FDI as far back as the year 2000. Fimi says the remedy lies in inviting exploration companies with technology and financial strength to undertake the risk-laden work.