Mineral exploration: Govt to give share in royalty to firms

Aiming to boost private investment in the mineral exploration space, government has decided that firms undertaking exploration will get a share of royalty from the mineral block for the entire lease period of 50 years.
The step, considered a major overhaul of the exploration laws in India, provides compensation for the firm undertaking exploration in case it fails to discover any mineral in the block.
The decision forms part of the government's much-awaited National Mineral Exploration Policy, which has been finalised by the Mines Ministry and has been sent to the 12 mineral-bearing states for their response.
"It is a win-win deal. Government handled the challenge, under the MMDR Act of formulating mineral exploration policy that not only gives incentives to private sector, but also increases mineral exploration in the country," Mines Secretary Balvinder kumar told PTI.

The ministry is in the process of sending the draft policy document for inter ministerial consultation, following which it will be put before the Cabinet for approval.
When asked about the blocks covered and the timeframe, he said: "There will be about 80-100 blocks that will be put up for non-exclusive reconnaissance permits (RPs) through the auction route and this can happen as early as May this year."

Reconnaissance Permits allow preliminary prospecting of a mineral through regional, aerial, geophysical, geo-chemical surveys and geological mapping. It does not allow pitting, trenching, drilling (except drilling of borewells on a grid) or sub-surface excavation.

In the years to come, mining will play a key role keeping in view the huge growth expected in India's infrastructure and will help in attracting huge investments (both domestic and foreign) thereby generating additional employment, Kumar said.
According to sources, private firms will be engaged to carry exploration work in identified blocks with the right to certain share in the revenue, a certain percentage of royalty/ premium, accruing to the state government throughout the lease period of 50 years.
The firm will also have the right to sell this to another company. The exploration agency will also be allowed to take part in the e-auction when the mineral block, after successful exploration, goes under the hammer, they added.

"The government will go for reverse bidding in awarding mineral blocks for exploration and the firm quoting the least amount of royalty/premium will win the order," they said.
That apart, the successful bidder can also go for a lump sum amount, which will be calculated on basis of net present value of that share of royalty/premium to be accrued during the lease period.
SBI Capital Markets, investment banking arm of state-run lender State Bank of India, will work out auction modalities of the mineral blocks for exploration, while government-owned metal scrap trading company MSTC will develop the platform.