FDI limit in mining to stay

The ministry of mines has rejected a proposal from the industry ministry to raise the foreign direct investment limit for the mining of diamonds and precious stones from 74 per cent to 100 per cent.

The proposal to allow 100 per cent FDI for coal mining by cement and steel companies is, however, expected to go through since the coal ministry has taken a stance that it is just a corollary to what is already available to power companies which want to mine coal.

The mines ministry is of the view that doing away with the cap with respect to diamond and precious stone mining is not required since it is not coming in the way of investment in the sector.

"It is not a major issue with prospective foreign investors. The real hurdle in attracting investment lies at the state government level since mining requires numerous approvals," said a ministry official.

This will mean that multinationals like De Beers and Rio-Tinto may have to wait for mining of diamonds and precious stones to be liberalised in the country.

The ministry also anticipates political opposition to the proposal since mining of precious stones and diamonds can lead to local level resistance, especially in states ruled by non-UPA parties.

Officials in the Department of Industrial Policy and Promotion (DIPP), from where the proposal orginated, said the note on opening up of the sector would be circulated to the Cabinet despite opposition from the mines ministry. "We will let the Cabinet take a final view on the matter," an official said.

The contention of the industry ministry is that allowing 100 per cent FDI through the automatic route is aimed at simplifying procedures.

"Even if we allow 100 per cent FDI through the automatic route, there are permissions required for mining. The intention is to at least do away with the requirement to come to FIPB," an official said.

The proposal for removal of FDI cap in mining is part of a note on comprehensive rationalisation of FDI procedures prepared by the DIPP for the consideration of the Cabinet.

Under the current norms, 100 per cent foreign owned companies can be set up without seeking FIPB clearance for mining of 10 major minerals and all minor minerals except diamonds and precious stones.