1. Centre set to offer attractive incentives to explorers for non-coal mineral blocks

Centre set to offer attractive incentives to explorers for non-coal mineral blocks

As several non-coal mineral blocks are being auctioned off to exploration companies, the government may offer them 0.05% of the value of the estimated resources (VER) as incentive, provided the asset is explored up to G2 level, which requires identified deposits to be delineated.

By: | New Delhi | Updated: November 28, 2016 6:27 AM
If the exploration is done only up to G3 level (prospecting stage), the incentive will be 0.035% of the VER or 70% of the amount given for a G2 level find. (Reuters) If the exploration is done only up to G3 level (prospecting stage), the incentive will be 0.035% of the VER or 70% of the amount given for a G2 level find. (Reuters)

As several non-coal mineral blocks are being auctioned off to exploration companies, the government may offer them 0.05% of the value of the estimated resources (VER) as incentive, provided the asset is explored up to G2 level, which requires identified deposits to be delineated, reports Surya Sarathi Ray in New Delhi. However, to ensure that the explorers don’t find the projects too risky, a market-determined annual advisory fee (AAR) will also be given to the firms, as per a draft contract framework prepared. The incentive will be at least equal to the AAR. It will, however, be capped at 10 times the AAR so that vary large finds don’t result in the government forking out too much.

If the exploration is done only up to G3 level (prospecting stage), the incentive will be 0.035% of the VER or 70% of the amount given for a G2 level find.

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To illustrate, if the VER in a G2 block is pegged at Rs 1,000 crore and AAR is fixed at Rs 3 crore, the explorer will get Rs 3 crore as incentive even though 0.05% of VER works out to Rs 0.5 crore only. In case the value of the resources is Rs 1 lakh crore, the explorer will get not more than Rs 30 crore (ten times the AAR) as incentive even though 0.05% of VER in that case works out to Rs 50 crore.

Under the new bidding conditions, the licences will be exclusively for exploration; the idea is attract private companies with expertise in the field to work in India, whose non-coal mineral deposits (base metals and deep-seated minerals besides limestone, bauxite and iron ore etc.) are inadequately tapped. The explorers will be appointed in a two-step process: National Mineral exploration Trust (NMET) will first invite for expression of interest (EoI) from global and domestic explorers and if they meet the stipulated technical criteria, they will be empaneled for three years.

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Technical and financial bids would then be invited from the empanelled explorers. Weights will be assigned to the technical and financial bids in the ratio of 70:30. Bidder quoting the lowest advisory fee will get the maximum score on the financial bid while technical bids will be evaluated separately. The bidder with the highest composite score will be selected.

Mineral areas have remained largely untapped in the country with only 10% of the 8 lakh square km area explored so far. Mining takes place on just 1% of the explored area. There are 16 notified exploration agencies in the country but the exploration activities and deployment of exploration is also low.

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