Govt to pay 30% upfront in critical mineral exploration
- Advance payments, a first in India’s mining sector, are expected to speed up the exploration of these minerals, in a country where mining remains dominated by public sector companies
New Delhi: The Union government plans to make advance payments to private companies selected to scout for critical minerals to get work on these projects started quickly, a mines ministry document showed.
According to the ministry’s proposed scheme of engagement, 30% of the project cost would be paid upfront once the selected company, called a notified private exploration agency (NPEA), submits a bank guarantee equal to the value of the advance to the National Mineral Exploration Trust (NMET).
The guarantee should be valid for at least 60 days beyond the date of completion of the project and acceptance of the geological report by NMET. The guarantee will be released within 30 days of settling the advance payment.
Advance payments, a first in India’s mining sector, are expected to speed up the exploration of these minerals, in a country where mining remains dominated by public sector companies.
India recently permitted private companies to scout for 29 critical and deep-seated minerals including cobalt, lithium, nickel, gold, silver, and copper, which are hard to find and reach, compared with surface minerals or bulk minerals.
Through amendments in the Mines and Minerals (Development and Regulation) Act, 1957, a new mineral concession, namely exploration licence, has been introduced and the private sector allowed to use this licence for critical and strategic mineral exploration.
“As exploration licences are being issued for the first time in India, the government wants to incentivize specialists to participate, especially junior mining companies who have the know-how for exploration of critical and strategic minerals. These minerals are present in very low concentrations naturally, and therefore, more difficult to find than bulk minerals. Unless the ecosystem is made more investor-friendly, specialists for the exploration of deep-seated and critical minerals may not come to India this time around as well,” said Ritabrata Ghosh, vice-president and sector head, Icra Ltd.
The advance paid will be adjusted in the first bill submitted by the NPEA, and a utilization certificate of the amount has to be submitted along with the bills.
Further payment will be made on reimbursement basis against the bills submitted.
NPEAs will be free to approach the NMET to explore the minerals of their choice. They will also be allowed to bid in auction of mineral blocks explored by them, which was not allowed earlier.
This is to reduce delays in sanctioning projects and speed up execution. Further, the provision to allow these exploration agencies in bids for the auction of already-explored mineral blocks will attract bigger companies in mining in the exploration arena.
This provision is also expected to encourage junior mining companies from around the world to come to India and take up exploration projects with NMET funding.
The government also plans to check monopolies in critical minerals by allowing one applicant to submit only a single bid in an auction of a mineral block; If a bidder submits more than one bid in an auction of a mineral block, or an affiliate submits bid in the same auction where such bidder has already submitted a bid, the government will reject both bids.
The increased focus on critical minerals is part of India’s ambitious plans to achieve energy transition and strengthen the domestic manufacturing sector, in which these minerals play a key role. China dominates the critical and rare earth mineral supply chain, but India and other countries in the Mineral Security Partnership (MSP) are looking to diversify their sources.
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First Published:16 Dec 2023, 06:30 AM IST
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