New Delhi: A consortium of Indian companies offered Afghanistan 1% royalty in its financial bid for mining copper and gold, but hopes to win the mineral deposits as a “preferred country”, according to people aware of the development.
The consortium includes Steel Authority of India Ltd (SAIL), Hindustan Copper Ltd, National Aluminium Co. Ltd and Mineral Exploration Corp. Ltd.
“We have offered 1% royalty. The others have offered 4%,” said one of them, requesting anonymity. “We have had to balance risk and reward as Afghanistan is not a safe place.”
Yet, the official said, India had a strong chance of winning some or all of the four regions with copper and gold deposits that it has bid for by virtue of being a friendly country pushing investments in Afghanistan. India has already won three iron ore blocks in the Hajigak area.
“The bids are being evaluated. In two-three weeks, the government will announce the results,” Jalil Jumriany, director of policy and investment promotion in the mines ministry of Afghanistan, said in a phone interview. He declined to comment on royalty.
The bids were opened by Afghanistan in August.
The official said there were four bidders and one of them was a group from Kazakhstan. There are some private Indian companies who have shown interest in Afghanistan that may join the Indian consortium.
“For geo-political reasons, they might give it to the Indian companies. Only then there could be some synergies with the existing investment (plan in Hajigak),” the official said. “The Afghan government has said it is evaluating the bids but has not said what parameters will carry how much weightage.”
Though India’s royalty offer was lower than the others, it made up for this with the capital investment plans and projected funds for corporate social responsibility, which are higher than the other bidders, he said.
The SAIL-led consortium for the iron ore project includes NMDC Ltd, Monnet Ispat and Energy Ltd, Rashtriya Ispat Nigam Ltd, JSW Steel Ltd, Jindal Steel Power Ltd and JSW Ispat Steel Ltd. It is slated to spend $10.8 billion (around Rs.56,160 crore today) in the Hajigak project that includes a 6 million tonne steel plant, an 800 megawatts (MW) power plant and 200km each of rail, road and power transmission lines.
“It will be an added advantage for us and them also if they give us the copper and gold deposits too,” SAIL chairman C.S. Verma said. “There could be synergies between the two projects.”
The Indian government is eager to play a bigger role in its neighbourhood and has promised about $2 billion in aid to the country for infrastructure development, said an executive in a private company that is also keen to mine in Afghanistan.
Jumriany said a new mining law is to be introduced in Parliament in the next two-three weeks. That will help establish where India’s two investment interests—one for iron ore and the other for gold and copper combined—are headed.
“It is a very investment-friendly policy. It is likely to give rights for exploration and exploitation on the same lines,” he added.
Verma said he expected the signing of the legal contract for the Hajigak blocks soon and dismissed reports of differences between the Afghanistan government and the Indian consortium.
“Our team is there (in Afghanistan) to finalize the documents and it can be expected to be signed soon,” he said.
Media reports said the Afghan government wants the consortium to start mining six months after the blocks are formally given to them and it also wants to place a cap on iron ore exports.
Indian companies are also hoping to mine coal deposits in Afghanistan. “We will be definitely interested in coal if they offer it,” said SAIL’s Verma. “I can’t guess the extent of the reserves that could be offered as it hasn’t been inferred yet.”
Verma said it was early to say whether the same parties were thinking of bidding for coal as well but it was likely to be a consortium again.