Page 6 - Why we need a New Mineral Exploration Policy for National Mineral Security?
P. 6
Discussion Paper
in an NERP will be used to conduct further exploration the Mineral (Auction) Rules 2015, which require a first-
by the government agencies so as to auction a mineral stage bidder (the entity incorporated in India) to have a
find. The NERP Rules 2015 states in Rule 4 (1) that the net worth equal to 4% in case of a mining lease-stage
NERP holder can submit his data and ask the government bid (1% in the case of a prospect-stage bid) of the
to auction the find. value of the estimated resources. This clearly rules out
the “Juniors” in relation to even a moderate-size
The Hoda Committee, too, had recommended mineral find.
introduction of non-exclusive reconnaissance permits
under an “open sky policy” so as to quickly complete The amendments made to the MMDR Act in
a preliminary survey of the country’s landmass for 2015 provide for the creation of the National Mineral
evidence of mineralization. The Hoda Committee had Exploration Trust (NMET) under Section 9C of the
recommended the “Large Area Prospecting Licence” Act. The Trust is funded by a 2% cess on the royalty
(LAPL) as a key element of its strategy to speed up and assuming an annual royalty flow of `20,000 to
exploration and induct high technology for the purpose `30,000 crore (including coal royalty) the funds accruing
along with private investment. The NERP instrument to the Trust will be of the order of `600 crore per
devised through the newly added Section 10 C, however, annum (or $100 million per annum). While this is much
is not an adequate incentive for anyone to expend funds higher than the current spending level in the region of
on reconnaissance in what is internationally perceived $5 million a year (mostly on coal exploration), this is
as a high-risk high-reward game, and large investments clearly a drop in the ocean compared to the exploration
from the private sector generally and foreign investments expenditures in countries such as Australia (US$ 900
in particular (which bring in special expertise and million p.a.) and Latin America (US $1200 million p.a.).
high technology as well) in this area may not be likely. It would appear that the Trust can cover only some of
The Hoda Committee analysis of the key role of the huge expenditure that is entailed in stepping up the
venture-capital based specialized exploration, including pace of exploration and may not be able to adequately
exploration through “Junior” exploration companies, capture the spirit of the high-risk high-reward paradigm
has many implications which can be ignored only at (see the section on the National Mineral Exploration
the cost of undiscovered mineral wealth. The Junior Policy below).
Exploration Companies are funded by venture capital
raised on the Toronto Venture Capital exchange and The Trust funds are currently used to fund detailed
other similar institutional innovations, and such capital exploration activities of the GSI and Central PSUs,
will be available only if the mineral discoveries made including MECL. There is a danger that the Trust funds
using the funds can be quickly monetized by acquiring may take GSI away from its primary work of baseline
the mining rights or selling the data to companies who surveys from geology, geophysics, and geochemistry
can do so. Introduction of an auction system will disrupt into the quicksand of detailed exploration for minerals.
this process. The fact that Section 8A(2) of the Act There is also a distinct possibility that GSI, which post
now mandates that the mining lease would be a non- restructuring is inducting expert manpower, may not
renewable 50-year, lease places a general cap on the be able to muster the scientific personnel to conduct a
exploration spend for a large world-class prospect, detailed exploration on a mass scale with the requisite
assuming that the other conditions mentioned above expertise (as well as the experience), particularly for
did not operate as a disincentive. deeper deposits of base metals, noble metals, and
gemstones. The entire strategy for exploration may
The fact that NERP Rule 4(2) enables the State actually need to be analysed further from the point of
Government to seek further information from the view of ensuring that GSI’s work of baseline data collection
NERP holder, and proviso to Section 10B(6) of the Act is not disrupted on the one hand, and funds and expert
read with Rule 6(3) and 6(4) of the Mineral (Auction) resources for exploration flow are unhindered on
Rules 2015 which enables the State Government to the other.
reserve a mine (at mining lease stage) for a particular
end use while seeking bids in an auction, only increases National Mineral Exploration Policy (NMEP) 2016
the difficulty in monetizing an exploration find. The last
straw may be the eligibility conditions required under A National Mineral Exploration Policy (NMEP) has
been brought out by the government in 2016 to give
6 JUNE 2017
in an NERP will be used to conduct further exploration the Mineral (Auction) Rules 2015, which require a first-
by the government agencies so as to auction a mineral stage bidder (the entity incorporated in India) to have a
find. The NERP Rules 2015 states in Rule 4 (1) that the net worth equal to 4% in case of a mining lease-stage
NERP holder can submit his data and ask the government bid (1% in the case of a prospect-stage bid) of the
to auction the find. value of the estimated resources. This clearly rules out
the “Juniors” in relation to even a moderate-size
The Hoda Committee, too, had recommended mineral find.
introduction of non-exclusive reconnaissance permits
under an “open sky policy” so as to quickly complete The amendments made to the MMDR Act in
a preliminary survey of the country’s landmass for 2015 provide for the creation of the National Mineral
evidence of mineralization. The Hoda Committee had Exploration Trust (NMET) under Section 9C of the
recommended the “Large Area Prospecting Licence” Act. The Trust is funded by a 2% cess on the royalty
(LAPL) as a key element of its strategy to speed up and assuming an annual royalty flow of `20,000 to
exploration and induct high technology for the purpose `30,000 crore (including coal royalty) the funds accruing
along with private investment. The NERP instrument to the Trust will be of the order of `600 crore per
devised through the newly added Section 10 C, however, annum (or $100 million per annum). While this is much
is not an adequate incentive for anyone to expend funds higher than the current spending level in the region of
on reconnaissance in what is internationally perceived $5 million a year (mostly on coal exploration), this is
as a high-risk high-reward game, and large investments clearly a drop in the ocean compared to the exploration
from the private sector generally and foreign investments expenditures in countries such as Australia (US$ 900
in particular (which bring in special expertise and million p.a.) and Latin America (US $1200 million p.a.).
high technology as well) in this area may not be likely. It would appear that the Trust can cover only some of
The Hoda Committee analysis of the key role of the huge expenditure that is entailed in stepping up the
venture-capital based specialized exploration, including pace of exploration and may not be able to adequately
exploration through “Junior” exploration companies, capture the spirit of the high-risk high-reward paradigm
has many implications which can be ignored only at (see the section on the National Mineral Exploration
the cost of undiscovered mineral wealth. The Junior Policy below).
Exploration Companies are funded by venture capital
raised on the Toronto Venture Capital exchange and The Trust funds are currently used to fund detailed
other similar institutional innovations, and such capital exploration activities of the GSI and Central PSUs,
will be available only if the mineral discoveries made including MECL. There is a danger that the Trust funds
using the funds can be quickly monetized by acquiring may take GSI away from its primary work of baseline
the mining rights or selling the data to companies who surveys from geology, geophysics, and geochemistry
can do so. Introduction of an auction system will disrupt into the quicksand of detailed exploration for minerals.
this process. The fact that Section 8A(2) of the Act There is also a distinct possibility that GSI, which post
now mandates that the mining lease would be a non- restructuring is inducting expert manpower, may not
renewable 50-year, lease places a general cap on the be able to muster the scientific personnel to conduct a
exploration spend for a large world-class prospect, detailed exploration on a mass scale with the requisite
assuming that the other conditions mentioned above expertise (as well as the experience), particularly for
did not operate as a disincentive. deeper deposits of base metals, noble metals, and
gemstones. The entire strategy for exploration may
The fact that NERP Rule 4(2) enables the State actually need to be analysed further from the point of
Government to seek further information from the view of ensuring that GSI’s work of baseline data collection
NERP holder, and proviso to Section 10B(6) of the Act is not disrupted on the one hand, and funds and expert
read with Rule 6(3) and 6(4) of the Mineral (Auction) resources for exploration flow are unhindered on
Rules 2015 which enables the State Government to the other.
reserve a mine (at mining lease stage) for a particular
end use while seeking bids in an auction, only increases National Mineral Exploration Policy (NMEP) 2016
the difficulty in monetizing an exploration find. The last
straw may be the eligibility conditions required under A National Mineral Exploration Policy (NMEP) has
been brought out by the government in 2016 to give
6 JUNE 2017
