OVERVIEW AND OPPORTUNITIES

IN INDIAN MINING SECTOR

Department of Mines
Government of India
March, 2004
 OVERVIEW OF INDIAN MINERAL SECTOR

• Plays a Crucial Role in the Industrial

Development of the Country
• Vast Geological Potential, Variety of Minerals
• Production of 89 Minerals in India :
¾ 4 Fuel Minerals
¾ 11 Metallic Minerals
¾ 52 Non-Metallic Minerals
¾ 22 Minor Minerals
 OVERVIEW OF INDIAN MINERAL SECTOR (Contd.)

• Value of India’s Mineral Production (including atomic

minerals) is US$ 12.90 Billion (2002-2003)
• Mineral Production Constitutes about 2% of the GDP
• Provides employment to more than one million people
• No. of operating mines (coal, lignite, metallic & non-
metallic minerals): 3012 (2000-2001)
• Mineral exports constitute 16% of India’s total exports.
INDIA’S CONTRIBUTION AND RANK IN
WORLD MINERAL PRODUCTION
Rank

• MICA - 1
• BARYTES - 2
• KYANITE
& SILLIMANITE - 3
• CHROMITE - 3
• COAL & LIGNITE - 3
• TALC/STEATITE
PYROPHYLITE - 4
• BAUXITE - 6
• IRON ORE - 6
• MANGANESE ORE - 6
 MINING POTENTIAL

• Favourable Geological configuration : Part of the

original Gondwana land mass comprising Australia,
Africa and Antarctic.
• Still largely unexplored through modern prospecting
techniques.
• Availability of sound geological, exploration and aero-
geo-physical data base.
• History of mineral occurrences, including base metals,
precious stones and diamonds.
• Large pool of mining engineers, managers and skilled
workers.
 OPPORTUNITIES IN THE INDIAN
MINING SECTOR

• A strong and established legal system and commercial

law practices, most conducive to ensure requisite level for
foreign investment
• Investment climate has become conducive with the
liberalization of Indian Mineral Policy
• Vast opportunity for private and foreign investors to set
up production facilities and tap large domestic market and
export potential.
 NATIONAL MINERAL POLICY

• Thirteen minerals earlier reserved for exclusive

exploitation by public sector opened for private
investment, both domestic and foreign.
• Induction of Foreign Technology and private
participation in exploration and mining of high
value and scarce minerals encouraged.
• Foreign equity investment in joint ventures
promoted by Indian companies allowed.
 AMENDMENT IN LAW

• Mines & Minerals Development and

Regulation Act, 1957 and rules amended in
1994 and 1999.
• Under law, for mineral concession, the
Company should be registered in India -
extent of foreign holding no bar.
 Amendment in Law (Contd..)
• Concept of reconnaissance operation distinct from and
prior to actual prospecting operations introduced

• Greater Stability of tenure provided –

9Mining Lease(ML) -minimum 20 years and upto 30 years
9Renewal of ML – 20 years
9Prospecting License( PL) – 3 years (with renewal upto 5 years)
9Reconnaissance Permit (RP) – 3 years
9Provides for preferential grant of –
9Mining lease to a PL holder
9Prospecting License to a RP Holder
AREA LIMITS (PER STATE) & TIME LIMITS

MAXIMUM PERIOD RENEWAL

AREA IN A (INITIAL
STATE GRANT)
MINING LEASE 10 SQ. KM. 20 YEARS 20+20
(MAXIMUM 30 YEARS
YEARS)
PROSPECTING 25 SQ. KM. 3 YEARS 2 YEARS
LICENCE

RECONNAISSANCE 10,000 SQ. KM. 3 YEARS NIL

PERMIT (SINGLE
PERMIT 5000
SQ. KM.)
AREA LIMITS (PER STATE) & TIME LIMITS (Contd..)

• Holder of Reconnaissance Permit (RP) to

progressively relinquish area as follows-
a) After completion of 2 years, area to be reduced to 1000
sq. Km. or 50% of the area granted, whichever is less
b) At the end of three years, area to be reduced to 25 sq.
Km.
 TIME FRAME FIXED FOR DISPOSAL

• Time frame for disposal of Applications

Reconnaissance Permit 6 Months

Prospecting Licenses 9 Months

Mining Lease 12 Months

• Time frame for approval of mining plan 3 months

 ENVIRONMENTAL CLEARANCES

• Environmental clearance mandatory for mining

major minerals where leased area exceeds 5 ha
• Environmental site clearance required if
prospecting license area exceeds 500 ha
• Site clearance is not required for undertaking
reconnaissance operations
CURRENT POLICY ON FOREIGN DIRECT
INVESTMENT (FDI)
(Effective from February, 2000)

(i) For all non-fuel and non-atomic minerals

other than diamonds & precious stones, foreign
equity holding up to 100% allowed through the
automatic route, for both exploration and
mining.
FDI POLICY, 2000 (Contd.)

(ii) In case of diamonds & precious stones,

foreign equity upto 74% is allowed
through the automatic route for both
exploration and mining operations. For
proposals seeking higher than 74% foreign
equity, the cases will have to be approved
by Government.

(iii) Foreign equity upto 100% allowed through

the automatic route for processing of
minerals and metallurgy.
FDI POLICY, 2000 (Contd.)

(iv) There is no bar on 100% repatriation of profits and

dividends

(v) With effect from 24.6.2003, for foreign technology

collaboration agreements, royalty payments at 8%
on exports and 5% on domestic sales may be made
without any restriction on the duration of the royalty
payments, through the automatic route, irrespective
of the extent of foreign shareholding.

(vi) With effect from 29.7.2003, issue of equity shares has

been permitted against lump sum fee, royalty and
External Commercial Borrowings in convertible
foreign currency which are already due for payment
/ repayment.
 MEASURES TO EXPEDITE FDI FLOWS

• Foreign Investment Promotion Board(FIPB)

now chaired by the Finance Minister.
• Foreign Investment Implementation Authority
(FIIA) set up in Department of Industrial Policy
& Promotion under chairmanship of Industry
Minister.
• FIIA assists in implementation of projects and
coordination between State and Central
Governments and different Ministries.
 IMPACT OF POLICY CHANGES
• 73 Applications for Foreign Investment
involving investment of over US$ 830 million
approved by the Government.
• 65 proposals granted approval for large area
aerial prospecting over 90,000 square kilometer
during 1997-1999.
• 165 Reconnaissance Permits granted for area
of 2,19,000 sq km till February 2004.
OUTCOME OF POLICY CHANGES

GOVERNMENT (FIPB) APPROVALS

Australia -13

Others - 25

Canada - 7

South Africa 8

USA - 9
UK - 9
 GLOBAL MINING COMPANIES IN INDIAN MINING SECTOR

* TRANSWORLD GARNET CO., CANADA

• MERIDIAN PEAK RESOURCES CORPN, CANADA
• PEBBLE CREEK RESOURCES LTD, CANADA
• BHP BILLITON,AUSTRALIA
• RIO-TINTO MINERALS DEVELOPMENT LTD,UK
• METDIST - GROUP, U.K.
* PHELPS DODGE EXPLORATION CORPN, USA
* DE-BEERS CONSOLIDATED MINES LTD, SOUTH AFRICA
* ANGLO AMERICAN EXPLORATION (INDIA) BV,
NETHERLANDS
 NEW INITIATIVE OF DEPARTMENT OF MINES

• The Offshore Areas Mineral (Development &

Regulation) Act 2002 notified on 31.1.2003.
• The legislation would provide proper legal
framework for Regulation and Development of
Minerals in territorial waters, continental shelf,
exclusive economic zone and other maritime
zones of India.
 NEW INITIATIVE OF DEPARTMENT OF MINES

• Statutory Rules have been amended for

prescribing detailed provisions for Mine
Closure Plans and rehabilitation of mined areas.
• These provisions specify the duties and
responsibilities of the mining lease holder and
also provide for financial assurance for fulfilling
the same.
 NEW INITIATIVE OF DEPARTMENT OF MINES

• Statutory Rules have been amended in April

2003 to provide for minimum size of mining
leases in the interest of scientific mining.
• These prescribed sizes are:
Small deposits: 1 hectare
Placer deposits: 2 hectare
For deposits other than
small and placer deposits : 4 hectare
 Legislative Reforms in the pipeline

ƒ Notifying rules under the Offshore Areas

Mineral(Development and Regulation) Act, 2002.
ƒ Revision of royalty rates for major non-fuel
minerals.
ƒ Consideration of report of Gupta Committee on
further legislative reforms which will primarily
benefit RP holders.

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 FISCAL INCENTIVES GIVEN BY THE
CENTRAL GOVERNMENT

• Supply of geological, geophysical and inventory

data on concessional basis.
• The rate of Corporate Income Tax for Indian
registered companies is now 35%, and for
foreign companies, 40%.
• Amortising the expenditure incurred on
prospecting for minerals and development of
mines.
• Depreciation allowance on building,
machinery and equipment. Accelerated
depreciation for environmental/ safety
equipment.
• Peak Rate of custom tariff reduced from 30%
to 25% in 2003-2004.
• Benefit of advance ruling under Custom Act,
1962 extended to wholly owned subsidiary
Indian company of a foreign Company.
Basic Rates of Import Duty on select base metals

Item Tariff in Tariff in

2001-2002 2003-2004
Aluminium 35% 15%
Zinc 35% 25%

Lead 35% 20%

Copper 35% 25%

 Fiscal announcements in interim
Budget 2004-2005
• In the interim budget for 2004-2005, round the
clock electronic filing of customs documents
for clearance of goods will be extended to 23
customs formations by March 31, 2004. At
present it is available in 9 customs formations
only. The customs clearance will be based on
self-assessment and selective examination
from June 30, 2004.

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