Mining is one of the core sectors that drive growth in an economy. India has held a dominant position as a country rich in its minerals resources. Not only does it contribute to GDP, it also acts as a catalyst for the growth of other core industries like power, steel, cement, etc which in turn provide an impetus for the overall development of the economy. Thus, mining sector has played a critical role in the economic development, attracting investment and generating employment in the country.
The Indian government opened up the mining sector to foreign direct investment after the announcement of the National Mineral Policy to infuse funds, technology and managerial expertise in the sector. Consequently, private investment both domestic and foreign has been permitted for the exploration and exploitation of varied minerals. Since then, the government has taken measures to improve FDI inflows in the mining sector, speed up environmental clearance of foreign and domestic investment proposals to effectively implement the environmental legislation. The National Mineral Policy, 2008 provides measures to streamline and simplify the procedures for grant of mineral concessions, develop a sustainable framework for optimum utilisation of the country’s natural mineral resources for the industrial growth in the country and at the same time improving the life of people living in the mining areas which are generally located in the backward and tribal regions of the country.
Current FDI Policy for Indian Mining Sector
According to the latest FDI Policy of 2016, up to 100% FDI by way of automatic route is allowed subject to the Mines and Minerals (Development & Regulation) Act, 1957 in case of mining and exploration of metal and non-metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores.
Up to 100% FDI under automatic route is also allowed for Coal & Lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities subject to the provisions of Coal Mines (Nationalization) Act, 1973 and in setting up coal processing plants like washeries subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.
Further, up to 100% FDI is allowed through Government approval route in mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities subject to sector regulations and the Mines and Minerals (Development & Regulation) Act, 1957.
FDI for separation of titanium bearing minerals &ores will be subject to the following additional conditions :
(a) Value addition facilities are set up within Indian along with transfer of technology;
(b) disposal of tailings during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987;
(c) FDI is not allowed in mining of “prescribed substances” listed in the Notification No. S.O. 61(E), dated 18.1.2006, issued by the Department of Atomic Energy.
Clearly, Indian mining sector is an interesting venture with the government leaving no stone unturned to make it investor-friendly. The changes introduced in the Consolidated FDI policy may be a welcoming step in as much as there are avenues opened for increased number of mergers and acquisitions between India and foreign companies. This is likely to foster the investment flow along with improvement in existing infrastructure by latest technology collaborations. Moreover, the recent changes in the Mines and Minerals (Development & Regulation) Act, 1957 brought about by the Amendment Act of 2016 seek a complete and holistic reform in the mining sector with provisions to address issues relating to sustainable mining and local area development, especially families impacted by mining operations.
Research inputs by my colleague, Priya Nagpal.
About Sanjay Swamy
Sanjay Swamy has over 24 years of experience and has worked with organizations like Ezetap Mobile Solutions Pvt. Ltd, ZipDial, UIDAI (Unique Identification Authority of India, mChek, KETERA, mPortal, Portal Software, Xerox/ContentGuard & Integrated Systems. Sanjay holds a MS, Aeronautics, Flight Control Systems from University of Washington, Seattle.