To spur big-ticket investments by global mining majors like Rio Tinto and BHP Billiton, the government has lined up large-scale liberalisation plans for the sector.
The ministry of mines plans to rewrite the foreign direct investment (FDI) regime to permit companies to move seamlessly between mining, exploration and prospecting for minerals.
This means companies bringing in FDI in one of these areas would be able to invest in the other two areas without having to obtain separate government permission for each activity. However, the changes will not be applicable for companies operating in sectors like coal and atomic minerals.
Current rules state that a company has to take permission for each individual sector, although the FDI regime is the same for all the three areas of operations. The government allows 100% FDI in all these sectors, but that becomes unviable as companies have to obtain fresh licences for each activity. The new mining policy would also encourage foreign companies to set up local joint ventures. The policy is expected to enable the mining sector to contribute an additional Rs 50,000 crore to GDP, besides providing large-scale employment generation.
The policy rewrite could change the face of the country?s mining sector, which attracts very little FDI, even after the government opened the gates for foreign investment, almost seven years ago. The government hopes to attract an additional $2 billion in FDI in the mining sector after the new National Mining Policy comes into effect.
Last week, the Centre reviewed its FDI policy for the coal sector and decided to allow foreign equity up to 100% in exploration or mining of coal and lignite for captive consumption as raw materials by those producing iron, steel and cement. This is an extension of an earlier government order of 2005 that permitted 100% foreign investment in an Indian subsidiary of a foreign company or in an Indian company to set up coal-processing plants.