Lagging Behind

Exploration works still require a push to take off

With several countries emerging as attractive destinations for mineral exploration, India is yet to make a mark in this area. In 2015, it accounted for only 0.6 per cent of the global exploration budget, as compared to 14 per cent for Canada and 12 per cent for Australia. Further, India’s exploration expenditure has been estimated at a meagre $17 per square km, in comparison to its BRIC counterparts – China and Brazil – that have exploration expenditures of around $56 per square km and $35 per square km, respectively. A key reason for such low levels of exploration in India has been the restrictions on depth, which is around 50-100 metres vis-à-vis 300 metres in Australia. Overall, significant efforts need to be made to realise the country’s immense mining potential.

Trends and policy initiatives

Mineral exploration is mainly undertaken by the Geological Survey of India (GSI) and Mineral Exploration Corporation Limited (MECL). Over the past three years (2014-15 to 2016-17), the GSI has invested over Rs 700 million in mineral exploration activities, with a significant portion being undertaken in the east and northeast regions, while MECL incurred an expenditure of over Rs 390 million between 2013-14 and 2016-17.

On the policy front, the National Mineral Exploration Policy [NMEP], 2016, was introduced, delineating the government’s action plan to ensure comprehensive exploration of the mineral resources (non-fuel and non-coal). One of the most significant changes brought in by the NMEP is the assurance to the explorer that cost compensation can be claimed in case the exploration effort is unsuccessful. This is expected to encourage private players to take part in exploration activities. Another key highlight of the policy is the prioritisation of minerals in accordance with their criticality for industry and economic growth/security. The Indian Bureau of Mines will develop a mechanism for fixing national priorities based on mineral intelligence information and this will be subject to periodic review.

Investment needs on a rise

Post the notification of the NMEP in July 2016, the GSI has identified 100 potential mineral blocks for regional exploration. Of these, 30 blocks each have been allotted to the GSI and MECL, 19 blocks to central and state public sector undertakings and the remaining 21 blocks have been earmarked for exploration by private entities, to be engaged under an exploration contractual framework. The exploration of these blocks is in various stages of progress.

In order to implement the recommendations of the NMEP, initially an amount of about Rs 21.16 billion will be required over five years, over and above the annual plan budget of the GSI under the Ministry of Mines.

Issues and challenges

Exploration, by its very nature, has a high degree of unforeseen challenges. While the reserves may be established, the economic feasibility of mining can vary significantly. This, in turn, leaves the outlook of a mining project uncertain. Besides, lack of coordination among various government entities and the mining industry is another challenge hampering the progress of the sector.

Financing exploration activity is also a big concern. Tapping the equity route, for instance, has its own set of challenges – stock exchange transactions are subject to significant reporting standards and regulatory procedures and costs. Further, investor appetite as well as valuations for risk are highly dependent on the prevailing macroeconomic scenario.

Besides, the mining sector faces huge gaps with regard to skilled manpower and technology deployment, which affects exploration works. There is therefore a pressing need for the private and public sectors to initiate training programmes to raise efficiency levels and increase productivity.

The road ahead

Going forward, concerted efforts are expected to be made towards driving mineral exploration in the country. The GSI has already initiated a National Aerogeophysical Mapping Programme over the geological potential areas, covering an area of about 0.8 million square km, for acquiring the baseline magnetic and spectrometric data. This programme will help identify concealed and deep-seated mineral deposits and will help improve the effectiveness of exploration activities. The Rs 3.52 billion project will be funded through the National Mineral Exploration Trust and is scheduled for completion by 2019.

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