Digging Deeper

Mineral exploration critical for sector growth  

Exploration is the prime mover of mineral development in any country. Blessed with ample resources of a number of minerals, India also has the geological environment for the occurrence of several others. However, it is far behind its global counterparts with respect to exploration activities.

While countries such as Canada and Australia account for a share of 14 per cent and 12 per cent, respectively, in the global exploration budget, India’s share is negligible. Meanwhile, most of the country’s current exploration expenditure is on coal, iron ore, and surficial minerals. In contrast, the largest proportion of global exploration spends are on gold, base metals (such as copper, lead and zinc) and diamonds.

Exploration work in the country is primarily carried out by the Geological Survey of India (GSI) and Mineral Exploration Corporation Limited (MECL). Exploration is carried out each year under field season programmes for which annual targets are set. In the case of coal, the Central Mine Planning and Design Institute (CMPDI) (under the Ministry of Coal) carries out drilling/ exploration works for Coal India Limited (CIL) and in non-CIL areas as well.

Recently, CMPDI and the Indian Institute of Technology, Kharagpur (IIT-KGP) signed an MoU for analysing coal samples from different exploration sites. The MoU is for a two–year period wherein CMPDI will entrust IIT-KGP with 3,000 m of coal annually to carry out various analytical tests to determine the quality of coal samples for incorporating in the former’s geological reports.

Over the years, the government has been taking a number of measures to enhance mineral exploration and mining activities in the country. Exploration agencies under Section 4 of the Mines and Minerals (Development and Regulation) [MMDR] Act so that only experienced, specialised and genuine firms undertake exploration works. In 2016, the government formulated the National Mineral Exploration Policy (followed by the National Mineral Policy, 2019) that states that “the private sector should be encouraged” to take up exploration and that “exploration should be incentivised to attract private investments as well as state-of-the-art technology, within the ambit of the auction regime, through right of first refusal at the time of the auction”.

Further, the National Mineral Exploration Trust (NMET) has been constituted under the MMDR Act for the purpose of regional exploration. Till March 3, 2020, NMET had approved 188 exploration projects at a total cost of Rs 8,909 million. A total of 63 projects have already been completed at an investment of Rs 854 million. In the three years 2016-17 to 2018-19, Rs 13.89 billion was received in the NMET Fund. The exploration work funded by NMET is carried out by exploration agencies after obtaining the necessary approvals/clearances from the concerned state government and other agencies/departments.

In 2015, the MMDR Act, 1957, was amended and auctions were made the only mode of granting mineral concessions. The MMDR Act did not permit the holder of a non-exclusive reconnaissance permit (NERP) to make a claim for grant of a mining lease (ML) or a prospecting licence-cum-mining lease (PL-cum-ML).

Ironically, it was the expectation of mining rights that lured private exploration companies to invest in high-risk exploration for minerals located deep below the earth’s surface. The auction route, however, has failed to create a favourable risk-reward model for attracting specialised overseas mineral exploration companies to invest in the country. In fact, India, Russia and Indonesia are the only major mining countries that grant mineral concessions through auctions.

The Mineral Laws (Amendment) Ordinance, 2020, has made some exceptions with respect to the NERP, whereby the holder of an NERP can submit an application for grant of a ML/PL-cum-ML through the auction process as per procedure to be prescribed, after undertaking specified levels of exploration.

To conclude, with barely 20 per cent of its reserves mined, India presents considerable opportunities for future discoveries of subsurface deposits. Exploration activity needs to pick up pace if the mining sector is to grow. For the success of the Make in India programme too, the assured availability of mineral resources will play an important role. In the absence of adequate exploration activity, over time, scarcity will push up prices, thereby reducing the country’s competitiveness.

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