The new Mining Bill encourages private players to enter prospecting. However, if the result is zero after the recce, who will compensate them? NN Gautam writes.
So far, prospecting in India has been a business of the government, and has been happening at a much slower pace than required, depending on fund allocations and availability. It is time this pace picÂked up to the speed that is required for more scientific estiÂmation of embedded resources.
Prospecting yields the element of certainty to the investment and ensures viable results and therefore makes a project scalable. A judicious judgment is needed to bring in new, faster technology. Higher technology is also costlier, and the motivation to adopt it is often low. The cost is front-ended with long-term benefits. So, techÂnology will emerge as sectors are now open to gain more experiences.
The Coal Ministry depends mainly on 2-3 orgaÂnisations alone for prospecting. One is the Geological Survey of India (GSI), which conducts regional drilling on a larger area, and the confidence is relatively low. If the regional drilling gives poor results, there is no investment interest. If regional drilling yields promising results, a detailed drilling exercise is underÂtaken by the Central Mine Planning & Design Institute (CMPDI), a subsidiary of Coal India. The Mineral Exploration Corporation (MEC) also does detailed drilling on coal and other minerals. There is also promoÂtional drilling, which is funded by the government. In such a complex situation, the overall prospecting levels in our country are not sufficient at all. Resultantly, there is no way to induct the private sector into it—prosÂpecting is under the government and the government has to pay for it.
However, the new Mines and Minerals (Development and Regulation) Bill provides outÂside investors to enter prospecting. This is the positive side. Now, what is the basis for inviting a foreign or a private prospector to get in? After speÂnding so much money, an investor would not like to get into a prospect where the total availability of results is zero. If a private party finds zero result, who will compensate him? This is the negative aspect of this bidding and the government and the mining sector are aware of this.
Therefore, the government has decided to provide available, albeit limited, data for a particular prospect before putting it up for bidding. Then the party can make a better assessment of risk. But the inadequacy of data is still a problem. In this bidding, after providing sufficient data to the government, the prospecting/mining firm—after transparently sharing the data—can walk out any time in the initial stage if the prospects turn out to be too poor for further investment. Such a permission is not available under the old Act. The new Bill provides that mandate.
Linkage of auctioning of mines and prospecting is all-important. It is a reward to a person who has taken the risk and succeeded. If the linking is not there then the prospects of people coming would be reduced. The party investing in a prospect in the hope that there is enough viable mineable reserve and mining the prospects is return on the risk taken.
The acceleration of prospecting in the mining sector could increase the inventory of the country’s mineral resources and therefore further investments in this sector succeed.
The author is Advisor, ACB (India), and former Advisor to the Coal Ministry.
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