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Crippling red tape undermines mineral exploration efforts

Crippling red tape undermines mineral exploration efforts
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First Published: Fri, Sep 21 2007. 01 57 AM IST

A gemstone mine in Jaipur, Rajasthan. Miners say bureaucracy, paperwork and corruption are holding their efforts up
A gemstone mine in Jaipur, Rajasthan. Miners say bureaucracy, paperwork and corruption are holding their efforts up
Updated: Fri, Sep 21 2007. 01 57 AM IST
Amid a global commodity boom, the government says it is keen to aggressively tap its mineral reserves. But many miners say that inordinate delays in permits, paperwork, corruption and bureaucracy are holding them up.
Consider Andre Nevin. By his estimates, a basic permit to explore minerals has to crawl past 82 desks of state and Central authorities.
A gemstone mine in Jaipur, Rajasthan. Miners say bureaucracy, paperwork and corruption are holding their efforts up
Lured by the country’s mineral wealth, the bearded exploration geologist with a professorial air arrived here in 1995. Over 12 years, the president of Adi Gold Mining Pvt. Ltd, a subsidiary of Vancouver-based Pebble Creek Mining Ltd, has spent time and money flying in his staff to negotiate with state officials every other month. Yet, after all these years, Nevin, who has worked in 15 countries from China to Tanzania, has few results: Of the two dozen-odd preliminary exploration licences he’s applied for, he secured just three.
“It’s like playing poker with mother nature,” says Nevin. “There is a culture of control. It’s almost like a throwback to the licence raj.”
Mineral exploration is risky business, but without mineral hunts for leads, no mines can be discovered. Since the opening of the sector in 1993, the government has been aiming to shift the financial risks of exploration from taxpayer-funded public agencies to private players. But obstacles in securing permits and unclear laws have kept India’s spending on mineral exploration at a low $5 million or Rs19.95 crore (including exploration and development), compared with $400 million in Canada or $600 million in Australia.
As a result, private investment in Indian mining has plunged 83.33% in the last three years—from $18 million in 2004 to $3 million last year. Meanwhile, demand for the commodities essential to industrial growth continues to soar.
The import bills for copper, nickel, gold and diamond have hit $20 billion—but no big mines have been discovered in India for the past 17 years. In many cases, minerals such as tin, potash, silver, nickel and platinum—all essential minerals for an industrializing nation—remain undiscovered.
The last big discoveries with economic potential were made in the early 1970s—the Malanjkhand copper mines in Madhya Pradesh and the zinc deposits at Rampura Agucha in Rajasthan.
Bauxite mines were found in Damanjodi in Orissa around the same time.
Postponements and permit denials are forcing companies such as De Beers India Pvt. Ltd and BHP Billiton India to reduce exploration operations as they await a new mining law to ease the waiting time.
“We may have to look at utilizing the money elsewhere, if delays persist,” says Surender K. Chaku, managing director of Metal Mining India, an exploration company backed by non-resident Indian investors. “We cannot keep waiting forever.”
Together with fellow mining company Indo Gold Ltd, Metal Mining India raised $15 million to exclusively investigate for gold ore in Rajasthan’s Banswara district.
After the company spent Rs7 crore and waited three years, the state government declared that the area was reserved for tribal people’s development, and could not be released for further exploration.
A month before De Beers India received 23 exploration clearances at once from the mining ministry in June, it fired more than half its staff of 75. According to a former employee, they were informed through email that the company wants to focus on newer mines in Angola and Congo.
“The company was fed up waiting for permits after spending Rs100 crore in exploration in the past six years,” the person said. De Beers would not return phone calls for comment.
Before mining, two sets of investigation permits must be secured—a reconnaissance permit which involves collecting soil and rock samples and drilling 10 four-inch-wide holes every 100 sq. km. This is followed by a prospecting licence, which involves more intensive drilling every sq. km. Under the rule book, the first permit should come within six months and the next within nine months.
“At present, what should take six months, takes six years,” says V.N. Vasudev, chief geologist at Geomysore Services, a mining company backed by some 200 Australian investors. “Nobody wants to come to India because of bureaucratic hurdles. Getting a licence is a headache.”
The company has applied for 226 licences since it set up office in 1994, but seen as little as 10% of this convert into prospecting licences, says Vasudev.
The falling investment in the sector has forced the government to re-examine the mining law, which is awaiting the Union cabinet’s approval before it finally goes to Parliament.
A committee headed by Planning Commission member Anwarul Hoda has proposed radical changes in the law, including throwing open a larger area for exploration and, for the first time, implementing a “finders-keepers” regime, whereby an investing explorer will get an automatic right to mine. But experts say while the policy has a sound strategy for mining, it has overlooked exploration, which is a separate business and requires separate skill sets.
“The Hoda committee has not separated exploration issues from mining, which is the root cause of the problem,” says Sushil Bhanu Singh Chauhan, adviser to mining lobby Federation of Indian Mineral Industries. “Many of the investments won’t even reach the mining stage if exploration is not encouraged in the first place.”
At present, mineral rights mainly rest with the states, but the Centre governs how permits are allotted on major minerals. An internal note of the mining ministry says the Centre can exert “pressure points” to clear licences languishing in states within a time limit.
It has suggested that an independent tribunal be set up to probe appeals against such Central decisions, but scepticism remains on adding another bureaucratic layer.
“Implementation of the policy will be an issue,” says Nik Senapati, regional vice-president of Rio Tinto’s Indian operations. “What we will need is the government and bureaucracy to work together to move things along.”
Rio Tinto has spent “tens of millions” in exploration, and is still waiting for a mine.
For Nevin, things haven’t budged much since the three permits were cleared. After spending Rs20 crore and three years of survey on copper and zinc deposits in Uttarakhand’s Pithoragarh district, he has been waiting for a mining lease for over two years.
His hopes were raised on 12 June this year, when mines and coal minister Sis Ram Ola told him in the presence of two other investors that he has given clearance to the Pithoragarh project “two weeks back”.
But everything has come to a standstill after an official of the mining ministry telephoned his South Delhi office that day to say the approval is not final yet. “Let’s have tea,” the person said.
Ola’s office declined repeated requests for an appointment for an interview.
“What no one understands is that exploration is the risky end of business,” says Nevin.
“You have to kiss a lot of frogs to find a prince.”
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First Published: Fri, Sep 21 2007. 01 57 AM IST