Thaindian News

New Delhi, May 1 (IANS) Natural resources like iron ore, lignite and bauxite should be allocated on the basis of auctions, instead of the current first-come-first-served system, to attract more investments, an industry lobby has recommended.

“For fully explored blocks of minerals, a transparent auction system can be adopted as is done in the case of NELP (National Exploration Licensing Policy),” Federation of Indian Chambers of Commerce and Industry (FICCI) said Saturday in its recommendation to the Ashok Chawla committee.

The central government appointed a high-powered committee led by former union finance secretary Ashok Chawla in February this year to set broad principles based on which natural resources, including water, land, gas, coal, spectrum and mines, should be allocated.

“The essential feature of NELP process is that in order to attract largest possible investments in exploitation of natural resources, where multiple parties stake claim for the resources, allocation is done through a transparent auction and competitive bidding process only,” it added.

In order to incentivise large investments for exploration of unknown minerals, FICCI said that preference may be given in allocation of mines to those who have participated in the exploration of unknown minerals.

According to the industry lobby, an auction-based system may not be appropriate in those cases where adequate information about the extent or size of minerals is not available.

In such cases, it may lead to a speculative bidding with a high risk of over paying by the investor, which may force him to abandon the project midway with associated environmental, social and technical consequences.

Other recommendations include giving due weightage to value addition while allocating natural resources, time bound mechanism for development of mineral resources, single levy for mining industry instead of multiple levies and stability in the pricing and duration of long term supply contracts.

There is also a need to bring parity between private and public sector undertaking (PSU) players in allocation of mineral resources, FICCI said.

Currently, state governments provide exclusive reservations to PSUs in allocation of certain mineral reserves. The government needs to release substantial mineral reserves for exploration and exploitation by the private sector to attract the required investments in the sector, added FICCI.