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Bushed out

Global companies engaged in mining in India are fed up of running from pillar to post. A new law promises to make things easier, reports Sanjib Kr. Baruah.

delhi Updated: Feb 25, 2010 01:06 IST

After three years of exploration in Rajasthan, IndoGold, an Australia-based company zeroed in on a sandy swathe for gold prospecting. The Eureka moment was short-lived as the Rajasthan mines department promptly “moved in” to reserve the land for “departmental exploration”.

Canadian company Adi Gold had been granted a mining lease after a protracted battle for 13 years. In Canada or Alaska, it takes just six months to proceed from the reconnaissance permit to the prospecting license to the mining lease.

The list is endless. Not surprisingly, after 16 years, there have not been many success stories to write about in the non-ferrous, non-fuel minerals sector.

In keeping with a ‘paradigmatic’ policy change in 2008 where the focus was on enhancing India’s competitiveness in the mining sector on a global level, a new law that seeks to address the shortcomings is being envisaged.

“Our regulatory system is based on the 1957 Act. Most of the mining was done by PSUs then and delay was not at all a factor. But the times have changed. Nor can one afford to ignore social pressures. The new act will address all these issues,” S. Vijay Kumar, special secretary (mines), told Hindustan Times.

“In the absence of independent regulators, mining companies will always be at the mercy of the state governments,” he added.

Mining is a complex activity from the exploration and reconnaissance phase to actual mining. It involves the use of very advanced technology that is not available in India, more so, in the case of non-surface minerals. Getting global companies to work in India will result in transfer of their technological knowhow and their levels of expertise to Indian hands.

“Moreover, these companies also observe ‘best practices’. For example, the manner in which these global companies close a mine after exploitation with regard to the environment and sensitivity of the local communities is something to be emulated. That is why we need the presence of MNCs in the mining sector in India,” said a mines ministry official.

The envisaged act by the Union Ministry of Mines aims at making the central government a regulatory authority rather than a controlling authority, with most clearance powers being given to the states.

The act will also provide for the setting up of an independent regulatory mining tribunal that will decide on all vexing issues such as delays. A key focus will be on sustainable development.

“Attracted by the prospective geology and the invitation of 100 per cent FDI, we came to India five years ago with an Indian JV (joint venture)

partner. After three years of exploration, we are still waiting for a licence for our major project. The delays we and other investors have faced certainly threaten future investment,” said Peter Bittenbender, chief geologist - India, IndoGold Mines.

Inordinate delays have compelled many global mining companies to leave India.

“No doubt, the country’s interests have to be protected, but the arbitrary nature of such decisions that deny the rights of the explorer, rejection of the prospecting licence on flimsy grounds, are all wrong signals to the investor,” said V.N. Vasudev, director, Geo-Mysore Services, another global mining company.

Close on the heels of the liberalisation drive in the country, a National Mineral Policy was formulated in 1993 and various steps were taken to bring the Mines and Minerals (Development and Regulation) Act, 1957 and rules framed under this act in tune with the policy.

An abiding motive had been the expectation that foreign companies would also bring in more advanced and economical mining technologies, besides more FDI.

Today a company waits for 3-5 years for exploration rights or a reconnaissance permit (which does not allow mining or extensive drilling or earthmoving), and after 3 years, many wait 2-4 years for a prospecting licence (which allows extensive drilling and some earthmoving – but no commercial mining). No one is willing to tie up their money and personnel for so long.

“The bureaucracy, sometimes conflicting regulations, officials’ apathy, tendency of officials to request information on elements outside their purview and lastly, the tendency of officials to hold applications in abeyance for long periods while hinting ‘we should meet for tea’ —these issues have to be addressed,” said Andrew E. Nevin, who heads Pebble Creek Mining, a joint venture partner for Adi Gold.