INTERVIEW-India plans mining licence to attract foreign investors

NEW DELHI, June 29 Wed Jun 29, 2011 8:47pm IST

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NEW DELHI, June 29 (Reuters) - India's draft mining bill will offer a prospecting licence guaranteeing the holder the right to produce 100 percent of any find, as the country seeks to attract foreign money and technology to its underperforming mining sector.

The bill will also create an independent regulator for the sector, Mines Secretary S. Vijay Kumar told Reuters, and should be approved by end-2012.

"There is a dire need to attract capital and attract technology," he said, adding India's mineral potential matched resource rich western Australia and southern Africa but exploration had only scratched the surface so far.

The Large Area Prospecting Licence (LAPL) proposes areas up to 5,000 square kilometres (sq km) for hunting for resources, allocated for a six-year period. Around 570,000 sq km of the 3 million sq km country has high potential for finds, he said.

"If you find the deposit, you have the mining licence and you go for mining. If you don't find the deposit, you leave empty-handed," he said, adding companies would have to hand data from the area to the government.

"It is certainly a first that you go from reconaissance straight to mining," Vijay Kumar added.

India's mining sector has only opened up fully to private investors in recent years and state-run companies have lacked the funds and expertise to probe deeper than the top 50 metres or so where its iron ore and coal reserves are found.

Global mining giants BHP Billiton and Rio Tinto have only small ventures so far in the country. In Orissa state, for example, Rio Tinto has been negotiating since 1995 with the state government to develop iron ore deposits in a joint venture.

The mining bill should go to the government for approval after possibly a final meeting of a group of ministers on July 7 and could be presented in parliament in August. The bill could take a year or so to make its way through parliament.

The draft mining law also proposes foreign firms share some of their mining profits with local communities as the coalition government tries to reassure its large rural vote natural resources are not being carted away by outsiders, a resentment which Maoist rebels are tapping into in some areas.

Years of protests, sometimes violent, have delayed many projects, including South Korean steel maker POSCO's plant in Orissa state, the biggest foreign direct investment in India at $12 billion.

In addition to the new LAPL concession, the government is studying ways to bring venture capital into the sector, Vijay Kumar said, including offering tax breaks to investors and ways for Indian companies to access capital abroad. (Editing by Jo Winterbottom)

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