National Mineral Policy 2006 - Department of Mines

mainly for minerals of base metals and noble metals, diamonds and precious stones, andbeach sand minerals (BSM) and a few for iron ore. Upto the year 2006, FIPB clearances forFDI above 50 per cent were given on a case-by-case basis and proposals for FDI amountingto Rs 4044 crore were reported to have been approved by the FIPB for investment in theIndian mining sector. However, only Rs 345 crore of this amount is reported to have actuallycome in before February 2006, when 100 per cent FDI was put on the automatic route. Whatis equally significant is that only very few of the RPs and PLs granted under the newdispensation have been converted into MLs.1.16 The failure of FDI to come into the mining sector even five years after theliberalisation of the investment regime, the lack of enthusiasm for investment in prospectingshown by the domestic private sector, and the lack of resources with public sector agenciessuch as GSI, MECL, and other state and Central agencies for undertaking promotionalexploration has meant that the sector is unable to contribute to growth of the gross domesticproduct (GDP) of the country in any significant way, let alone up to its potential. This lack ofinvestment has hampered the nation’s ability to (i) delineate and extract already locatedmineral occurrences from the ground; and (ii) discover the huge resources of minerals thatpossibly are still underground.1.17 The growing demand for metals and minerals is continuously pushing up bothdomestic and international prices. The margins available in the mining sector have been verysubstantial and are widely expected to continue being so in the foreseeable future. Thecountry’s accelerated growth rate warrants a rapid development of the mining sector, onwhich most of the basic industries in the manufacturing sector depend. It is, therefore,imperative that the bottlenecks in the development of the mining industry are identified andsuitable steps taken to deal with them. The world mineral scenario has changed significantlysince India last reformed its mineral regulatory system in 1999. In today’s globalisedeconomy, investments in mining and exploration flow into those countries where apart fromthere being mineral potential the regulatory regime is also investor friendly. Mining, being arisk-oriented activity with long gestation periods and uncertain returns on capital, isextremely sensitive to the regulatory framework operating in a country. In the last decade,many developing countries have significantly reoriented their mining laws and policies toattract global investment. In a study conducted in 2001 by the World Bank, ‘Mining SectorReforms and Investment—A Global Survey’, India was found to have one of the lowest12