Tax money and high-risk prospecting

Without investment in exploration leading to discovery of mineral deposits, no investment would be forthcoming in mining, writes Subhash Bahadur.

India is a densely populated country with an ancient heritage of mining and metallurgy. Consequently, most of surficial and near surface deposits have been either discovered and/or extracted. Further more large tracts of land underlie the high reaches of the Himalayas, or are buried deep beneath the Indo-Gangetic alluvium and Deccan Traps.

Mineral prospecting in such environments requires cutting edge technologies that can easily access remote locations and sense mineral presence at great depths. These would include sophisticated satellite imageries, deep sensing aircraft/helicopter borne and ground geo­physical (magnetic, electrical, EM etc) surveys, trace geochemistry, deep penetrating and light weight high speed coring/non-coring drill machines.

Private prospecting

Mining, and by implication, mineral exploration (encompassing reconnaissance, prospecting, detailing and evaluation stages) are extremely risky businesses, best suited for private enterprise. Government agencies such as the Geological Survey of India (GSI) and the Mineral Exploration Corporation Limited (MECL) are best suited to conduct scientific studies. They are neither capable of nor oriented to risk-taking activities. In most resource-rich countries, specialised and dedicated explo­rers, popularly referred to as ‘junior exploration com­panies’, are encouraged to take up mineral exploration, rather than expending tax-payers’ money on such risky tasks. By virtue of having worked in diverse geographic terrains and geological domains, these exploration com­panies acquire considerable expertise and develop cut­ting edge technology, suiting to different situations. Once having made a discovery, they normally transfer the­ir licence to mining companies and move on to other fields. These junior explorers therefore thrive in environ­ments that (i) ensure expeditious grant of licences on first come, first served (FCFS) basis; (ii) guarantee secu­rity of tenure and (iii) allow free transferability of licences.

The MMDR Bill 2011 proposes competitive bidding even for mining and prospecting blocks where prosp­ecting and reconnaissance have been conducted through the employment of private resources, since it omits the mention of public agencies and public expenses.

Even here there is a caveat: government agencies and public enterprises do not require any licence to conduct reconnaissance and prospecting. Areas will be reserved for them, through notification.

Lack of policy

Although exploration or prospecting is an integral part of mining normally preceding it, the two nevertheless are distinct activities, requiring separate policies and regulations to implement them. This distinction was recognised only in the National Mineral Policy 2008. It was thus presumed that the MMDR Bill 2011 would address this issue adequately, assigning due importance and priority to this activity. However, the proposed bill has failed to live up to expectations.

What is required for giving an impetus to explora­tion activities is to ensure:

• Simplified procedures for expeditious grant of concessions;
• Preferably a single licence encompassing reconnai­ssance, prospecting and evaluation stages;
• No stringent conditions for grant of environment and forest clearances, since the activities involve are largely of non-invasive nature;
• Compensation to landowner/holder of usufruct rights etc based on actual damage caused; and
• No pre-condition of value addition at this stage.

Without investment in exploration leading to discovery of mineral deposits, no investment would be forthcoming in mining. An E&Y study for the Ministry of Mines has brought out that with the right kind of support, the mining sector has the potential to:

• Add Rs 945,000-Rs 1,125,000 crore (Rs 270,000-360,000 crore as direct and Rs 675,000-765,000 crore as indirect contribution) to the GDP by 2025.
• Create 2-2.5 million direct jobs by 2025, and an additional 11-13 million jobs through indirect employment opportunities created in other sectors.
• Contribute Rs 275,000-315,000 crore of revenue to the central and state governments through corporate taxes, royalty and export duty collections by 2025.
• Make a substantial impact on the mineral-rich states: for instance, the contribution of mining to state GDP in Chhattisgarh could grow from the current 13 per cent to 20 per cent in 2025, with a five-fold increase in royalty collection and twice as many people employed in the sector.

First-come allotment

In India, it is only in case of (i) Non Exclusive Reconnaissance Licence (NERL) and (ii) High Technology Reconnaissance cum Exploration Licence (limited to non-bulk minerals) that the FCFS principle is applied. At the Federation of Indian Mineral Industries (FIMI), we are opposed to auctioning of mineral con­cessions per se.

Nowhere in the world, with the possible exception of Russia and Kyrgyzstan, where also only mining blocks are auctioned, are mineral concessions allocated on basis of bidding. On the contrary, since each individual mineral deposit is unique, evaluation of bids can only be subjective leaving room for exercising discretion, a fountainhead for corruption.

Mineral exploration in India has continued to lan­guish mainly because of the absence of private enterprise in spite of the sector having been opened up for quite sometime. This is primarily because of unfavourable poli­cies and cumbersome time consuming bureaucratic pro­ce­dures. With no redressal proposed in the MMDR Bill 2011, the Indian mineral sector may continue to be shu­n­ned by domestic and foreign investment.

The author is Advisor—Minerals, Federation of Indian Minerals Industries (FIMI).