India seeks to transform govt-owned companies into ‘resource majors’

KOLKATA (miningweekly.com) – India is preparing a blueprint for the transformation of government-owned and -operated companies into "resource majors" with each straddling the entire chain of mining operations.

Government has identified power generation major NTPC, Steel Authority of India Limited (SAIL), Hindustan Copper Limited (HCL), NMDC, National Aluminium Company (Nalco) and NLC (formerly Neyveli Lignite Corporation) as the companies set for a transformation, a government official with knowledge of the drafting of the blueprint has said.

While this is a preliminary list, the goal will be to develop integrated resource companies with operational and managerial scope stretching across exploration, mining, extraction, processing and production of products.

The purpose of such a transformation is to have government mining and mineral companies be at the forefront of implementation of the National Mineral Exploration Policy 2016 (NMEP).

This will enable the mining industry to ramp up yearly mineral production by 20% by 2020, which is the stated objective, which, in turn, should increase the sector’s contribution to the national gross domestic product to 2% from 1%.

Elaborating on the various categories of government companies, the official said that while some, such as SAIL, Nalco and HCL, had their own operational mines, they operated captive raw material sources only.

This group of companies would need backward integration into exploration to supplement exclusive exploration agencies such as Geological Survey of India and Mineral Exploration Corporation.

At the other end of the spectrum, power utility NTPC is venturing into coal mining for captive consumption and, as such, will enter coal exploration projects along with current efforts to secure proven coal reserves through the auction route.

The NMEP envisions the Mines Ministry auctioning identified exploration blocks to private and government sector companies on a cost-sharing basis. If such exploration leads to viable resources the exploration cost will be borne by the successful bidder for those blocks.

However, if the exploring company does not discover any viable resources, the government will reimburse the expenditure incurred on the exploration project.

A former CEO of a government-owned metals company said that the transformation of government companies into resource majors was “desirable” as exploration projects did not yield immediate returns and were unlikely to attract private exploration companies, including international majors.

However, in sharp contrast, a former Mines Ministry bureaucrat said that the model of integrated resource companies that the government was envisaging would take decades to evolve, citing examples of international majors such Rio Tinto and BHP Billiton. Much of their growth has been as players in global mergers and acquisition.

Instead, he advocated greater focus on debottlenecking and operationalising existing mines with government companies taking a lead, citing data which show India has 3 900 operational mining leases with only 1 800 operating mines.

Indian mineral production, barring coal, was pegged at 495-million tons in 2015/16 with a growth rate of 9% over the previous year.