KOLKATA (miningweekly.com) – The Indian government is expected to put into play a new mineral policy, possibly before the end of August, aimed at a more investor-friendly alignment of exploration and development projects.
The Mines Ministry, which is the driver of the proposed policy changes, is expected to suggest amendments to the Mines, Minerals Development and Regulation Act (MMDRA) 2015 to align it with the new framework, ensuring a level playing field between investors in mineral exploration and mineral development projects.
Officials aware of the framing of the policy said that with only 10% of the area with established resources being explored and private investments in exploration almost negligible, it was imperative that a new policy should incentivise such investments, as mineral exploration remained “very inadequate both by international standards, as well as [the] requirements of the country”.
One of the key areas being addressed by the Mines Ministry was the grant of nonexclusive reconnaissance permits (NREPs), which, since introduction in 2015, has found few takers among private investors.
It was pointed out by the officials that investors opting for NREP did not have any long-term incentive to undertake exploration projects and pump in risk capital, since, on successful establishment of definite resource, the block had to be handed back to either the federal or provincial government for subsequent auction to private investors.
With NREP holders having no stake in the final development of the mineral block and just compensation for exploration investments, private resource majors had stayed away from exploration projects unable to build long term business models in the domestic industry, the officials said.
The amendment to MMRDA 2015 would seek to rectify this uneven playing field by granting NREP holders the first right of refusal at the auction of any mineral block successfully explored by the permit holder.
Another option under consideration was that instead of offering an NREP, the government would grant a combined NREP and a prospecting licence bundled with a mining licence at the very start of the mineral exploration process.
Industry analysts said that few private investors were willing to commit high cost risk capital after acquiring NREP, which in its present form did not make any business sense for global resource majors with integrated exploration and mineral production business verticals, as NREP did not guarantee them any foothold in resources established by them.
It has been learnt that the Mines Ministry is also toying with the option of offering fiscal incentives linked to NREP in cases where an investor brings in international best practices in exploration.
However, a section of government officials said that the option of financial incentives linked to NREP would face the challenge of government’s ability to open its purse strings at a time when efforts were aimed at checking the national fiscal deficit. At the same time, it would be a challenge to lay down specific parameters of international mineral exploration best practices and technology to determine the quantum of fiscal incentive that could be put on the table.