Date | Sept 07, 2016:

In an effort to increase India’s mineral production, the National Democratic Alliance (NDA) government may leverage public sector undertakings (PSUs) to explore reserves.

This comes in the backdrop of the National Mineral Exploration Policy (NMEP), which allows private companies to explore the country’s mineral reserves.

“During meetings with the SBI Capital Markets Ltd (a state-run investment bank), which is currently preparing the bid document for auction of mineral blocks for exploration use, the present framework was not found to be satisfying,” said a senior government official requesting anonymity.

Currently, mining contributes around 2-2.5% to India’s gross domestic product (GDP) with the government projecting a GDP growth of 7-7.75% for the current financial year. The government wants to increase the share of mining sector in the country’s GDP by one percentage point over the next three to four years.

According to NMEP’s provisions, mineral blocks containing lead, zinc, gold, silver, diamonds and iron ore could be handed over to public and private entities for reconnaissance stage, or early-stage exploration, to accelerate mineral explorations across the country. These blocks are to be awarded on a revenue-sharing basis in case exploration efforts lead to discovery of resources which can be auctioned.

“It has been decided in a recent meeting that these blocks should be handed over to PSUs, which may take up the detailed exploration work,” the official added.

The meeting, held on 3 September, was attended by senior officials from the Geological Survey of India (GSI), the Mineral Exploration Corp. Ltd (MECL) and the Central Mine Planning and Design Institute Ltd (CMPDIL).

A second government official, who did not want to be identified, said the mines ministry will shortly finalise the blocks to be given to the PSUs to carry out the exploration work and a meeting for the same will be scheduled shortly.

The NMEP allows for making the basic geoscience data, a pre-requisite for investments in the sector, to be made publicly available.

Queries emailed to the spokespersons of the ministry of mines, SBI Capital Markets, GSI, MECL and CMPDI on 6 September remained unanswered.

While India’s mineral production for financial year 2015-16 increased by 9% to 495 million tonne, the country failed to achieve mineral exploration targets for financial year 2015-16 in terms of drilling.

Experts believe that private investors are currently wary of making any investment in exploration.

“Exploration requires risk capital and given the current commodity cycle and low confidence in the mining sector, finding takers for exploration work may pose a challenge for any policy intervention, let alone those that may have uncertainties in conditions of tenement or licencing,” said Dipesh Dipu, partner at Jenissi Management Consultants, a Hyderabad-based energy and resources consulting firm.

“For greater private sector participation, the policy needs to create a new breed of investors who have the risk appetite for exploration. Established miners may not always fit the bill and hence, may not be the right target,” Dipu added.

In order to strengthen India’s mineral industry, the government has taken a slew of measures, including allowing 100% foreign direct investment in the sector.

(Source: http://www.vccircle.com/)