Engineering & Mining Journal

JAN 2019

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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Page 44 of 59

INDIA MINING REPORT JANUARY 2019 • E&MJ 43 COME LEARN WHAT'S NEW AT BOOTH #1920 TOGETHER STRONG FOR THE FIRST 40 YEARS. READY TO ROCK THE NEXT 40. Your trusted screening resource since 1978. | 864-579-4594 Policy Quirks So why are private investors, domestic and foreign, keeping a distance from vast unex- plored mineral resources? Blame it on in- tended or unintended policy quirks. Since the 2015 auction route was made man- datory for allocation of a mineral block for development following a Supreme Court verdict, private investors found the playing field rather uneven. Non-exclusive reconnaissance permits (NREPs) granted by the government for exploration projects found few takers. Simply because a NREP holder was ex- pected to undertake exploration projects, invest high risk capital but on successful- ly establishing economically viable min- eral blocks, had to hand the asset back over to the provincial government for sub- sequent auction. A NREP holder did not have any long- term interest in the project apart from reimbursements on cost plus basis with no stake in ultimate development of the asset established by it. The government has now promised to ensure a level playing field by amending the legislative framework under which a NREP holder would be granted the first right-of-refusal at the auction of any min- eral block successfully explored by it. Taxes are Taxing The Indian mining industry is the high- est taxed in the world. According to the Federation of Indian Mineral Industries (FIMI), the representative body of miners, the effective rate of tax in case of mines allocated earlier through the preferential allotment dispensation stood at 64%, while in case of mines allocated through auction the effect rate amounted to 60%. The aggregate incidence of tax comprise miners' contributions to District Mineral Fund (DMF) and National Mineral Explo- ration Trust (NMET) apart from indirect tax rates under Goods and Service Tax (GST) as applicable, making the total levy one of the highest in the world. Policy Procrastination Being caught between a rock and a hard place is an inherent risk for Indian min- ers. About 288 mineral operational blocks were slated to be up for auction in 2020, but neither the federal government nor state governments responsible for holding the auctions were geared up to tackle an impending possibility wherein these mines would be forced to shut down operations unless the mining leases were allotted to new investors for continued production. The legacy issue was that these mines had been allocated under the erstwhile dispensation of preferential allotment. But jolted by a Supreme Court verdict, a 2015 auction route was made manda- tory for allocation of all mineral resource blocks. So once the existing mining lease of 288 assets lapses in 2020, the gov- ernments will either have to complete the auction and grant new mining leases to successful bidders or close mines where leases lapsed. Moreover, the federal Ministry of Mines has directed all state governments to conduct fresh exploration of all exist- ing mining leasehold areas up to level of G2. But the state governments maintain that conducting such levels of exploration through few government-run exploration agencies within stipulated timelines was a challenge and the country faces possible risks in mineral production post-2020. The Federation of Indian Chamber of Commerce & Industry (FICCI) in a paper ti- tled: "Indian Mining, A Different Perspec-

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