Home / Politics / Policy /  Government planning to revamp mining licensing regime

New Delhi: The government is working on a new method to auction mining leases to match commodity price cycles and investor appetite.

Early next month, the central government will release all available geological data on mineral reserves, said a government official, who asked not to be named. Based on this data, any investor can request a mining licence for the area of his choice. Once the government receives a request, it will invite bids from other investors too for that area. An auction will follow, based on which the block will be assigned.

The move will help customize mining leases depending on the risk investors are willing to take on specific minerals. This approach could also prevent instances like having to cancel mining lease auctions for want of investor interest when prices of certain commodities remain bearish.

Taking the market sentiments on specific minerals into consideration while drawing up the mining lease auction calendar would help as output of some of the minerals has grown significantly in volume so far this financial year, although the growth in value is not so impressive. Iron ore output, for example, grew about 27% in the April-January period of 2016-17 to 154 million tonnes from a year ago, while value growth remained only at about 8% in the same period.

“While exploration activities will remain high on priority to capture accurate data that will aid investors in decision making, the subsequent auction of mines for production of minerals will be modulated to suit investor appetite," said the official quoted above. Geo-scientific data will be supplied free of cost as a public good. The move is somewhat similar to the “open acreage policy" that is being implemented in the oil and gas industry with the only major difference being that mineral exploration and subsequent production may be undertaken by two different entities. In the hydrocarbon sector, exploration and production rights are granted to the same contractor. The mines ministry has devised a plan to offer compensation to companies to explore and generate data.

According to Anjani Agarwal, partner, metals and mining at consultancy firm EY, the auctions thus far were generally of blocks either producing or with high degree of certainty of resources. “Except for initial coal block auctions, the bidders’ interest has been relatively low and one of the key reasons has been availability of insightful data in a transparent manner. Given that more blocks should come on stream to accelerate the mining activity, and auction is the adopted route for granting concessions, it is imperative for the government to follow global leading practices of high quality data being made available to attract potential bidders with experience and competency," said Agarwal.

Drawing investors to monetize the country’s offshore mineral reserves is also on the agenda. The government is now buying a Rs250 crore geotech vessel that will dig up to three metres below sea bed to capture data on mineral deposits, said the person quoted above. Coastal area already mapped for presence of minerals will be explored.

Fortunes of the mining industry are closely linked to that of the user industries. Iron ore production, which accounted for more than half of the country’s Rs35,989 crore mineral output in the April-January period of 2016-17, is still struggling due to subdued demand for steel in real estate and construction sector as well as the global overcapacity for steel that adversely impacted the metal’s price. Debasish Mishra, partner, Deloitte Haskins & Sells, said that although commodity prices have firmed up a bit in global markets, they have not risen to the level that could trigger fresh cross-border investment proposals."

The regime of granting mining lease was changed from administrative allocation to auctions in January 2015 through an ordinance, which was followed by the amendment of the Mines and Minerals (Development and Regulation) Act, 1957.

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