JV hurdle for MNC miners to go

In a move that could increase foreign investment in Indias mining sector from trickles to streams,the government is planning to remove the ban on foreign mining companies having several joint ventures to mine the same mineral in the country. This key policy revision along with proposed changes in the law for time-bound approvals is expected to spur investments by the likes of Rio Tinto,De Beers,BHP Billiton,Anglo American and Vale in minerals ranging from iron ore and bauxite to diamond and gold.

In a move that could increase foreign investment in Indias mining sector from trickles to streams,the government is planning to remove the ban on foreign mining companies having several joint ventures to mine the same mineral in the country. This key policy revision along with proposed changes in the law for time-bound approvals is expected to spur investments by the likes of Rio Tinto,De Beers,BHP Billiton,Anglo American and Vale in minerals ranging from iron ore and bauxite to diamond and gold.

Indias regulations allow 100% foreign direct investment (FDI) in mining through the automatic route,but foreign firms interested in joint ventures with domestic firms are required to give a declaration to the government that they do not have another JV in the country.

According to the Union mines ministry,FDI in mining comes through the automatic route and there is no reason for holding back proposals for such declarations. Since smaller mining companies are located in different mineral-rich areas of the country,foreign miners face hurdles when it comes to expanding operations in India. To achieve a critical mass of mineral production,the mining firms need to simultaneously conduct prospecting and reconnaissance operations in different localities,and current policy impedes such initiatives.

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A government official told FE that under the proposed change,the DIPP will allow foreign miners to have any number of allies in the country to mine the same mineral without taking permission from the foreign investment promotion board.

According to sources,the mines ministry feels there is a need to allow foreign companies to conduct multiple businesses seamlessly. The new mineral policy and the changes proposed to the Mines & Minerals (Development & Regulation) Act (MMDR),1957,also talk about introducing more predictability in awarding mining-related contracts. There are also proposals to cut delays in decision-making and introduce security of tenure and rights of transferability of awards to make businesses more viable and exit easier. The government has placed 100% FDI in exploration and mining of diamonds and precious stones on the automatic route,but subject to MMDR Act clearances and self-declaration about no existing JV in the same field. Similar is the case with coal and lignite mining for captive consumption. These restrictions,along with delayed forest and land clearances by multiple agencies have led to below-potential FDI in mining. FDI in mining has been around $510 million between 2000 and 2007,which is less than 1% of total FDI inflows during the period.

Several MNC miners and small players in prospecting have demanded scrapping of the self-declaration clause as this was creating unnecessary delays in carrying out expansion plans. In fact,none of the mining multinationals have announced any big investment plans for India. The changes will clear decks for Australian mining giant Rio Tinto to have multiple JV partners in different projects in India. The company has a joint venture with Orissa Mining Corp and is considering many such JVs in India.