With the aim of doubling mining output and cut mineral imports, India expects to woo 1 trillion rupees ($15 billion) of investment over five years.
Mines Minister Piyush Goyal said in an interview that including upfront payments for discovered deposits when the mines are auctioned, the government’s goal is to fast-track exploration. While acknowledging challenges such as land acquisition and environmental hurdles, the administration will invite foreign companies to participate, he said.
“We’re working to change the rules of the game from doing small amounts of exploration in an incremental fashion to doing it on a fast-track, one-shot, big-picture way,” Goyal, 52, said on Saturday in New Delhi. He added that 50 billion rupees into the search for deposits could easily be poured as there was “scope” to do so.
In order to achieve Prime Minister Narendra Modi’s objective of faster development powered by more manufacturing, the world’s fastest-growing major economy will need increasing supplies of everything from iron ore to coal.
In an indication of the challenges Goyal’s agenda faces, some foreign companies have put Indian plans on hold because of red tape and difficulties in acquiring land and that include big names like Rio Tinto Group and steelmaker Posco.
After bruising corruption scandals over discretionary or free allotments, India in 2015 embraced competitive auctions as the best long-term approach to resource allocation. The nation auctions exploration and mining rights.
After critics said there wasn’t enough incentive for companies to scour for minerals, rather than upfront, officials earlier had worked out a policy of paying explorers a royalty over the life of a mine.
Mineral exploration in India is “nascent,” said Goyal, who is energy minister and added mining to his portfolio when Modi reshuffled his Cabinet in July. To increase their chances of success in the $2 trillion economy overseas explorers and miners should consider installing largely Indian management in ventures with local partners, he said.
To focus the country’s exploration efforts, he’s assessing the minerals being imported by India, the minister said.
For example, according to the CRU Group, a commodities researcher, imports of iron ore may amount to about 10 million tons in 2016. An effort by Vedanta Ltd. to mine the mineral at Niyamgiri in the eastern state of Odisha was resisted by environmentalists.
According to the Federation of Indian Mineral Industries, with minimal private-sector involvement, of the 575,000 square kilometers with geological potential in India only about 13 percent has been explored in detail so far.
“It doesn’t make sense to import what we already have in our country. Raising domestic output will put pressure on prices of the commodity and make it more affordable for users,” said Seshagiri Rao, joint managing director at Mumbai-based JSW Steel Ltd.
As part of cost cutting and after more than a decade after its discovery, Rio Tinto Group on Aug. 22 said it’s shutting a top-class diamond deposit in India. Delays in green permits stymied development of the project.
The company subsequently offered voluntary severance to 300 employees and said it will seek to source services and equipment from the South Asian nation.
(Adapted from Bloomberg)
Categories: Economy & Finance