“All these stipulations are enough to make mining unviable. The initial euphoria in coal waned after some time and in case of non-coal, out of 78 mineral blocks offered, auctions of only 33 could be achieved. The inputs are enough for Fraser Institute to put India among the 10 least attractive jurisdictions in its survey of mining companies”, said R K Sharma, secretary general, Fimi.
With the country's exploration regime almost nationalised after the formation of NMET which will meet the exploration expenses of PSUs, Fimi feels in such a backdrop, India will continue to be one of the least explored countries in the world. Though the new National
Mineral Exploration Policy 2016 solicits private sector participation for deep seated minerals, such a policy may encourage contractual drilling in the name of exploration, Sharma said.
India's exploration expenditure pales into insignificance when compared with other resource rich countries such as Canada and Australia. Canada accounts for 14 per cent of the global mining exploration expenses, Australia ranks next with 13 per cent share. India's share is a minuscule two per cent. For each square km of a potential mining lease, Australia spends $5580 while Canada incurs $5310. By contrast, India spends only $9 per square km.
Unlike India, the taxpayers' money is not used elsewhere on mineral exploration, a risky business venture. The governments of mineral rich countries like US, Canada, Australia, Brazil, South Africa, Chile and Mexico create a congenial ecosystem for exploration by providing the necessary data to the private companies. In these countries, the privately managed entities known as junior exploration companies undertake detailed exploratory work and enjoy leeway to sell or transfer mineral concessions. The junior exploration companies take the lead in greenfield exploration by raising funds from venture capital in stock exchanges. If India were to make exploration an attractive business for the private sector, the policies need to be aligned with the practices in other resource rich nations, Fimi felt.
The other factor denting India's 'Mining Attractiveness' is the steep taxation rate. Mining is the most taxed activity in India compared to anywhere in the world. The effective tax rate (ETR) on mines granted before the new MMDR Act, 2015 is 64 per cent while for mines won through auctions, it stands at 60 per cent. On a comparative note, the ETR for Mongolia at 31.3 per cent is half of India's. Other mineral rich nations also boast of attractive ETR rates- Canada (34 per cent), Chile (37.6 per cent), Indonesia (38.1 per cent), Australia (39.7 per cent) and South Africa (39.7 per cent). Countries competing for mineral sector investments usually offer ETRs in the range of 40-50 per cent.