Govt mulls 100% FDI in mineral prospecting

The government is looking at allowing up to 100 per cent foreign direct investment in mineral prospecting. The move, which Commerce Minister Kamal Nath today said was aimed at exploiting the country's huge mineral reserves, would lead to investment and technology inflows into the country.

"FDI has to be channelised to sectors where growth has not taken place and mineral prospecting is an area where we need to attract FDI. Today we have large reserves of coal, iron ore, magnesium, but new technologies are needed for mineral prospecting. Efforts will be made to attract FDI in mineral prospecting, and if needed the policies may be changed,'' Nath added.

The relook at FDI norms in mineral prospecting is part of a larger review, similar to the one undertaken early this year, officials said.

"The exercise for 2007 has already started and would be completed before the Budget session of Parliament," the officials said.

Around the world, mineral prospecting attracts huge investments. Nath said this move would lead to the entry of global companies, although he agreed that there were a number of difficult issues that would need resolution. "We have to look at our prospecting policy in the long term", he said.

The Indian mining sector was opened for FDI in 1993, after the announcement of the new mineral policy.

The policy was further liberalised in January, 1997, which opened up the automatic approval route for investments involving foreign equity participation up to 50 per cent in mining projects and up to 74 per cent in services incidental to mining. In the year 2000, the sectoral guidelines in the mining sector were reviewed to promote further liberalisation.

In February this year, the government permitted 100 per cent FDI in coal and lignite mining under the automatic route for captive consumption by power projects and iron, steel, cement and other allied activities permitted under the Coal Mines Nationalisation Act, 1973.

FDI up to 100 per cent via the automatic route is also allowed in mining, covering exploration and mining of diamonds, precious stones; gold, silver and minerals. Up to 74 per cent FDI is also allowed in atomic minerals, subject to mandatory approval from the Foreign Investment Promotion Board.