News: India hopes to unlock mineral riches with policy move

(RTR 06/07/2006) Mumbai - India's untapped mining potential could be unlocked and new copper and zinc deposits discovered if policy changes recommended by a government committee are speedily implemented.

Only 10 percent of India's landmass has been explored, largely because archaic laws have blocked prospecting by foreign firms.

The government committee, which unveiled its recommendations last week, said that rules should be eased for the granting of permits for surveying, prospecting and leasing of a mine.

Foreign prospecting companies rarely come to India because they can not sell the data they map and they can only utilise the information if they venture into mining themselves.

"Foreign mining companies looking to invest in India are bogged down by the amount of paperwork they have to do. The committee's recommendations can slash the time required for clearances," said R.K. Sharma, secretary general of the Federation of Indian Mineral Industries.

The committee's recommendations will be forwarded to the office of Prime Minister Manmohan Singh for input before being sent it to the mining ministry and then cabinet. Government officials are expecting final approval in three months.

Among the recommendations, the committee said the federal government should have the right to overrule state governments and hand over mining rights to individual firms in cases of delay.

The committee said each state should allocate mineral development funds to help develop infrastructure such as road and rail lines.

One senior government official, asking not to be identified, said the new rules were crucial so India could unlock the mineral riches of the country.

"India was once part of the ancient Gondwana land," he said referring to the prehistoric super continent which included most of the land masses of the southern hemisphere.

"Its geological background shows it has to be a resource-rich country, but we have hardly explored anything," he said. "The policy changes would allow hundreds of prospecting companies to come in."

India produces 89 minerals, out of which 11 are metallic and 52 non-metallic. The country is estimated to have 2.92 billion tonnes of bauxite, the raw material for aluminium, or some 10 percent of world reserves.

It is also estimated to have 23 billion tonnes of iron ore deposits and 276 billion tonnes of coal.

But government officials say the full extent of the country's mineral reserves was unknown as the state's Geological Survey of India has concentrated mainly on finding coal.

Officials believe the country's geographical structure also indicates that India may also have extensive reserves of base metals such as copper, zinc and lead.

But few foreign firms have ventured to invest in India's mining sector because of red tape, even though foreign direct investment is allowed.

The mining sector is sorely lacking in funds and technology, and easing bureaucratic hurdles through policy changes is needed. State-run agencies lack even basic tools such as well-equipped helicopters. Those agencies can prospect only at around three metres below the ground, whereas big foreign firms can explore at depths of 300 metres.

"Multinationals are eyeing the natural resources of India, especially iron ore and bauxite," said Kaustav Mukherjee, vice-president of the India office for A.T. Kearney.

"The new mining policy recommendation would be a positive turn for them," he said. "However, companies should be 'incentivised' to set up process plants rather than just exporting the mining output."

POSCO, the South Korean steel maker, and Mittal Steel are among the firms looking to set up manufacturing plants in India, so they can be close to the vast iron ore deposits.