Revitalizing India’s mineral exploration sector

Authors: Biplob Chatterjee & Aparna Roy

A recent news report suggested that India has a mineral trade deficit of Rs 3.2 lakh crores per annum currently.
Ironically, mineral imports are mostly for commodities like coal, gold, diamonds, iron ore, bauxite, zinc, lead, copper, silver and manganese, and the deficit accounts for 3 to 95% of the supply.
Whereas, for most of these minerals, India has excellent geological potential.
However, the unique operationalising elements of India’s new minerals code, MMDR Amendment Act, 2015, has effectively stalled any opportunity for the best private sector explorers make mineral discoveries in India. 
The code splits the “mineral value chain” into two, where the accountability to carry out risky exploration leading to a Geological Resource establishment rests with the government using tax-payer’s money, and the miner only thereafter gets to mine after winning the mineral asset through a rigid e-auction process.
The code splits the “mineral value chain” into two, where the accountability to carry out risky exploration leading to a Geological Resource establishment rests with the government using tax-payer’s money, and the miner only thereafter gets to mine after winning the mineral asset through a rigid e-auction process.

Lately, however, a realisation has dawned that private sector participation in India’s mineral exploration programme is necessary. Hence the fund collected through the National Mineral Exploration Trust (NMET) is being contemplated to be used for attracting international explorers on contract terms. But this process is unlikely to revitalize the stalled exploration to the desired level.

Since 1970s very few effective Greenfield exploration programme have been carried out in India leading to mineable discoveries, except during the phase between 1998–2008, when private sector exploration resulted in discoveries of diamonds, precious metals, basemetals, rare earth elements and other potentially mineable targets.

Globally, after the economic depression of 1973-75, foreign direct investments (FDI) and domestic private sector investments led to a boom in mineral discoveries. India, however, showed a reverse trend during this period, with no major discoveries after Rampura Agucha (zinc-lead), Malanjkhand (copper) and East Coast (bauxite) deposits. Only the exploration window, opened between 1998-2008, resulted in the discovery of three world class deposits viz. the Bunder diamond deposit through Greenfield exploration by Rio Tinto and the brownfield extension discoveries at Rampura Agucha (zinc-lead) and Sindesar Khurd (zinc-lead) by HZL-Vedanta.  These successes generated significant interests in India’s pre-2015 mineral permitting regime. When India moved into the current permitting regime on 12 January 2015, over 66,000 applications to explore or mine were waiting at various statutory gates of the States and the Centre, most of which got cancelled automatically.

MMDR-2015 aspired to bring in transparency to the process of allocation of mineral assets. However, for reasons unknown, the new act also replaced the successful (exclusive) Reconnaissance Permit (RP) process of the earlier regime by a provision of Non-Exclusive Reconnaissance Permit (NERP). MoM has since discovered that there are almost no takers for the NERP.

Another quirky element of the new code, brought in to facilitate a rigid e-auction process was the necessity to meet the Evidence of Mineral Content (EMC) Rule criteria before dispensing the mineral asset. The EMC meant that only those assets could be dispensed to miners, where a Geological Resource through a detailed drilling have been pre-established. The Geological Survey of India (GSI), Mineral Exploration Corporation Limited (MECL), Indian Bureau of Mines (IBM) and the State Directorates have since struggled to generate EMC compliant assets. In three and a half years since the new act, intense efforts by State agencies have succeeded in generating less than a dozen odd small blocks of gold, base-metals and tungsten, apart from some blocks for bulk commodities like limestones, iron ore (including old lapsed mining leases) and bauxite, in this country of 3.2 million km² area!  The GSI, which generated the finest quality baseline geological, geophysical and geochemical datasets since independence and identified 0.5 million km² of obvious mineral potential (OGP) area in the country, now finds that less than 10% of the area have been explored in any detail, of which most of the defined assets for mainly bulk mineable commodities like iron ore, coal, bauxite and limestone are already licensed!

The fact that a ground exploration of a hundred targets may lead to only one developing into a viable mine, indicates that exploration is a risky business. This means that discovery of another Bunder Diamond Deposit may require up to rupees 2000 crores for exploration, if not more. To achieve the government’s self-stated objective of doubling the mineral sector contribution to the GDP, India needs to discover minimum of two Bunder deposits every year. The rupees 400 crores being collected annually in the NMET fund, is thus grossly inadequate to carry out the desired exploration in India.

Policy mandarins of the NITI Aayog and MoM have to realise that the intellectual capabilities of exploration is a restricted domain of few experienced geologists in the world, who specialise in specific commodities of a particular style of mineralisation occurring in a specific terrain type requiring the use of specialised exploration tools.

Such exclusive capabilities rest with a handful of junior and major mining companies of the world. India needs to attract these miners by allowing them the security of title over their discoveries. Additionally, the elements of the act must provide an ecosystem, where specialist geologists from mining companies have the freedom to select the areas to explore from freely available baseline data and invest without a fear that these assets could be taken away by the government for a re-auction.

https://www.orfonline.org/expert-speak/revitalising-indias-mineral-exploration-sector-45865/