Every government dreams of increasing the money available for fiscal spending without increasing taxes or borrowing. It is not impossible; imagine if a government took 450 crore of tax revenue and spent it at the world’s casinos and won. Given the odds at a casino, this would seem improbable and probably reckless. But this is analogous to what the Indian government has done with its exploration and mining policy over the last few years. Needless to say, it has not had a win against the odds.

Exploring the earth for economically viable (high-grade) mineral deposits is a high risk improbable activity. To understand exploration, here’s a scenario: Imagine flying over Delhi in a spacecraft and trying to spot humans. Now imagine that you can only see down to Delhi via a super long eyepiece, no wider than your eye and you are not only trying to find humans, but specifically, rich humans. Would you spot Delhi’s tony neighbourhoods or the rich who live there? Mineral exploration is attempting to do this, but with the added complexity that it doesn’t even know where on the map Delhi is.

Over the long term, the return on investment on exploration on average across the world is very poor. The exploration industry uses sophisticated capital market speak to raise risk capital, but despite the sheen, in rational probabilistic terms, they are ‘gamblers’. The Indian government created the National Mineral Exploration Trust Fund in 2015, which is currently worth approximately 450 crore (and rising via a dedicated charge). This money is designated for exploration (aka ‘gambling’). The money has been allocated to the state mineral resources departments who have no record of exploration success. Fortunately, thanks to the workings (if not inefficiency) of the government, much of the money is yet to be spent.

So, what do clever countries do? They don’t gamble, they act as the casino and entice gamblers, generally small junior exploration companies, to spend global capital in their country. However, for this to work, the host government has to tolerate a few jackpot winners, who make major finds of tier-1 assets and are able to profit from their luck. But just like a casino, these jackpots are smaller than the total sum of failed exploration projects.

While the Indian government has decided to gamble taxpayer money on exploration, it has not outlawed private sector exploration. In the last couple of years, it has introduced auctions to transparently enable explorers and miners to be allocated land to explore or gamble with. This is arguably better than the pre-existing system; whereby in practice most believe that a lack of transparency was problematic. The Indian government has also publicly made available online geophysical survey data. This is commendable, but in gambling terms is akin to publishing the casino floorplan.

While the policy seeks to encourage private sector exploration, the fine print of the law in practice is very different. Existing mining law provides that any discoveries (winnings) made by an explorer will be handed back to the government and the government will reimburse the explorer for the funds they expended. How many gamblers would go to a casino where their best chance was to win the right to have their gambles reimbursed (only after an Indian government audit) and little chance of winning meaningfully more?

Thinking about it in more business terms—imagine if Apple did most of their research and development in India but when these efforts led to the development of the next generation smart phone or device, the Indian government seized the technology, auctioned it to the highest bidder and only reimbursed Apple for their costs incurred, at best with a small regulated return (and Apple had to justify these costs to a government auditor).

Such a scenario is untenable. In India, the number of prospecting licences the government has issued annually has dropped from 360 a couple of years ago to only 21 in the last 12 months and the number in which the actual work has been undertaken has dropped from 156 to 5 in the same period. The gamblers/explorers are clearly going to other places.

Some argue mineral resources are finite and their extraction should be saved for future generations. The reality is extraction technology improvements and substitution overcome scarcity of material such that the real price of minerals declines on average, year by year. After all, “The stone age didn’t end because we ran out of stones." This means, for every year the existing ineffective policy remains, the real value of associated tax revenue from India’s geological minerals declines. That tax reduction for India is lost and an equivalent gain is made by countries that enable mineral production today.

There are also broader trends at play over rare-earth minerals, which may be of extreme value, even if they are of lower volumes than common commodities. These may require state-of-the-art technologies but could help India’s ambitious clean energy plan. To get there, India needs to rethink how it apportions risks and rewards, and brings in the private sector not as a subordinate contract follower but as a capital risk taking wildcatter. After all, the biggest risk is an opportunity cost of doing nothing.

Peter Nichols and Rahul Tongia are, respectively, a former senior mining executive and fellow at Brookings India.