From ground up

Chhattisgarh Governor Shekhar Dutt has written to the prime ministers office seeking its intervention in what he described as anomalies in the Mines and Minerals Development and Regulation Bill 2010. The broad concerns that underlie his letter are worthy of consideration. Oil and gas exploration,for example,has generally shifted to an auction-based bid system. Telecommunications spectrum,too,as we now know,is better handed out based on competitive bidding. Yet the MMDR draft suggests that prospecting licences for minerals need not meet this standard. Under its current wording,areas which have pending applications for licences cannot be opened up to states for competitive bidding. The mines ministry at the Centre,which is piloting the bill,argues that once it becomes law,all pending applications will be nullified,allowing states to notify areas for competitive bidding afresh. Yet that should not be the drift of new legislation,which should focus on decreasing the level of discretion available.

The mines ministrys argument is simple: prospecting licences need not be treated like other licences,because they are not necessarily revenue generating,and a high-risk venture. However,that is not enough reason to not allow for auctions. Auctions are price-finding mechanisms. If the price they discover is low,so be it,but Indias error so far has not been in setting prices too low,but in not discovering prices at all. The mines ministrys concern is that prospecting,particularly for rare earths,is a nascent industry. This is correct,to the extent that most prospecting in India today is not high-tech surveying for minerals deep below the earths surface,but surface-area prospecting,especially for iron ore. That,however,is bound to change,as the prices of rare earths and metals such as copper,lead and cobalt climb internationally. All the more reason,therefore,to build it up from scratch with efficient,transparent institutions.

Mining has for too long been held hostage to political interference,to discretion,and to insiders grabbing licences. Exploration for heavy minerals,in particular,is something which requires cutting-edge technology,and should ideally,to minimise environmental and political damage,be undertaken by the most professional of firms. These are precisely those most likely to benefit from an open bidding process. On each count,the thrust of the new MMDR bill should be to reduce the scope of outdated,problematic first-in-line licensing,and open up as many areas as possible to competitive auctions.