The mines ministry’s effort to ramp up the exploration work in the non-coal, non-fuel mining sector by offering the explorer the right of first refusal at the time of auction may not yield the desired result. Experts say global majors like Rio Tinto and others would only be interested in doing the exploration work if they are allocated, post-exploration, the mining lease and the right to do with the mine at their free will.
The proposal to accord the right of first refusal, as proposed in the mine ministry’s draft National Mineral Policy (NMP), is an incentive to lure the explorer in the beleaguered exploration sector where India remains far behind than most other resource-rich countries.
According to government’s own estimates, only 10% of the 8 lakh square km potentially resource-bearing area has been explored in the country so far. Mining takes place on just 1% of the explored area. The area has remained largely dominated by public sector units.
The government had earlier tried to draw the attention of the explorer incentivizing them with a certain percentage of royalty payout throughout the lease period or a lump sum amount upon successful exploration through the extant National Mineral Exploration Policy (NMEP), 2016. However, that has failed to break the ice.
This is mainly because the explorer has to give the explored block to the states which will then put the block for auction and upon a successful auction of the block, the explorer would get their reward – be it in the form of royalty percentage or lump sum amount. This would essentially mean their invested capital would remain stuck for months, if not years.
The draft NMP, however, also proposes to incentivize exploration through “adequate financial package or any other appropriate incentive as per international practice.”
Through the proposed policy, the government intends to lay special emphasis on prospecting and exploration of minerals in which the country has a poor resource-cum-reserve base despite having the geological potential for large resources.
“Special attention will be given towards exploration of energy critical minerals, fertilizer minerals, precious metals and stones and strategic minerals which are otherwise difficult to access and for which the country is mainly dependent on imports,” the draft policy said.
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