Aiming to boost mineral exploration, the mines ministry has sought Rs 500 crore as budgetary support to take up air-borne geo-physical mapping in the country’s potential resource-bearing area estimated to be 8 lakh sq km requiring an estimated R1,500 crore.
In its budgetary proposal for next fiscal, the mines ministry is also likely to seek income tax benefits for mineral explorations at par with the mineral oil sector where there is a separate provision relating to prospecting.
India has never done air-borne geo-physical survey to assess the mining potential of the country. However, a global tender inviting bids from companies having expertise in the field has been recently floated following a meeting with the potential bidders. It may take a couple of months to select the successful bidder. The project is expected to start from the next fiscal.
The data acquired will also have applications in identifying structures conducive for trapping oil and natural gas, demarcating aquifers, and locating zones with potential for radioactive mineral concentration.
The airborne geophysical surveys over the obvious geological potential areas will be carried out with a uniform flight line spacing of 1,000 m with flight altitude of 120m. Of the 8 lakh sq km of potentially resource-bearing area, exploration work has so far been done in just 10% of it and mining is currently being conducted in just 1% of the total potential area.
In fact, this is one reason why the contribution of the mining and quarrying sector to the country’s GDP has remained stagnant at less than 3% for some 15 years. Often compared with India in terms of geological potential, Australia has already done 100% of the exploration work in its mineral-bearing areas.
Two state-run institutes — Geological Survey of India and Mineral Exploration Corporation of India — have been doing the exploration work so far. However, they could not live up to expectations due to paucity of funds and a lack of policy focus on catching up with the world standards. Meanwhile, the government has recently allowed state-run firm having expertise in the mining activity to carry out the exploration work as well.
Relating to the prospecting of mineral oil, separate provisions in the Income Tax Act include special allowances to cover abortive exploration expenses in respect of any area surrendered prior to the beginning of commercial production by an assessee and cover cases where transfers of any prospecting business for oil is made among others.
“However, as far as other minerals are concerned, the deductibility of expenses is far more restricted. Section 35E of the IT Act provides that prospecting expenditure incurred in a period of up to 4 years prior to the year of commencement of commercial production only will be allowed as a deduction over a period of the next 10 years. The tax incentives in respect of prospecting for minerals should be on par with that available for prospecting of mineral oils,” said a mines ministry note.