Date | Jul 14, 2016:
With a limited risk appetite among global investors across different destinations and jurisdictions, permitting 100% foreign direct investment (FDI) in a specific sector and then hoping for a rush of inflows would be a mistake with an opportunity cost. The realisation seems to have dawned on the top policy drivers of government which had allowed 100% FDI in the mineral sector along with a few other measures. By government’s own admission, “these initiatives have fetched only limited success.” It has also been realised that the policies once made are not cast in stone, especially in a fast changing global business climate that has witnessed wild fluctuations in the fortunes of the giants engaged in metals and minerals space. With demand for such commodities touching a new low across the world, expecting fresh investment in mining exploration by just allowing an open FDI regime would not have been enough.
With mining and manufacturing being identified as the solid pillars of an economy that needs to create tens of millions of jobs, the investment eco system for the entire value chain from exploration to commercial exploitation has to be compelling for the investors who have several options in a world competing for dollars. The new National Mineral Exploration Policy (NMEP) approved by the Union Cabinet last month has to be seen in this co-ntext and offers attractive options to investors, especially those who are loathe to put money in risky exploration.
The NMEP emphasises on making available baseline geo-scientific data of global standards in the public domain, quality research in a public-private partnership with special initiatives for search of deep-seated and concealed deposits. It also aims at creating a dedicated geo science database. If the explorer agencies do not discover any auctionable resources, their exploration expenditure will be reimbursed on normative cost basis. This clause would compel the investors who have so far been risk averse. Besides, the policy breaks the monopoly of the Geological Survey of India and Mineral Exploration Corporation bringing in competition in pure exploration play. Importantly, the state governments would be assigned an important role in identifying mineral blocks to be put up for auction that would be done in a transparent manner. For the mining firms which are open to business risks spread across different geographies, the government has already allowed transfer of mining lease, acquired through auction routes. While NMEP is a tempting document for the investors, a lot more needs to be done by way of road shows by top bureaucrats, ministers and even chief ministers of the mineral-rich states.
(Source: http://www.deccanherald.com/)