Photo: Hindustan Times
Photo: Hindustan Times

Cabinet allows private bids for mineral exploration, production

National Mineral Exploration Policy will help attract private investment and use natural resources to their full potential, says Arun Jaitley

New Delhi: The Union cabinet on Wednesday approved a new policy to introduce competition and private participation in the exploration and production of minerals such as gold, diamond, limestone and iron ore, under which 100 blocks will be offered shortly.

Finance minister Arun Jaitley said after a cabinet meeting chaired by Prime Minister Narendra Modi that the National Mineral Exploration Policy will help in attracting private investment and in using the country’s natural resources to their full potential.

The policy does not apply to coal and oil and gas, for which already there is competitive bidding. It will apply in the case of other minerals, where production rights were so far assigned without an auction to the same firm that previously did prospecting and exploration of resources.

From now on, once a company returns a block to the government after exploration, the states concerned will put them to auction, along with the data provided by the explorer. The company that wins production rights in the auction will give royalty for 50 years to the original explorer, and share revenue with the state government.

Mint had reported on 18 May that the government was preparing a new mineral exploration policy under which production rights will be assigned through competitive bids.

“The auction will be conducted by state governments. The central government will only handhold them. SBI Capital Markets Ltd will prepare the modalities of the auction, including the bidding parameters," mines secretary Balvinder Kumar said. The original explorer will also be free to bid for production rights, he added.

The royalty stream will help the explorer recover the costs incurred and the auction will ensure that production licence goes to the entity that offers the best terms for the state. Companies with expertise in resource discovery can focus on exploration, while firms with the risk appetite and resources to invest in production can bid for production rights.

Experts said that exploration spending and its coverage have been relatively low in India compared with other countries. “The new policy is a step in the direction of building a robust pipeline of mines. Hopefully, with this policy enablement, global specialist explorers with modern technology will be attracted to India. They will be willing to embrace exploration risks and be more engaged with the evolving mining scene in the country if they see a stable, meaningful and potentially rewarding policy environment," said Anjani Kumar Agrawal, partner and national leader–metals and mining with advisory firm EY.

“The policy brings the global exploration industry, with a large number of private operators with innovative remote sensing and aerial technologies to India, and will significantly improve our understanding of our resources base, especially of deep-seated and rare minerals," said Kameswara Rao, leader of energy utilities and mining at PricewaterhouseCoopers in India.

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