KOLKATA (miningweekly.com) - Fresh negotiations on India’s stalled investments into steel and iron-ore mining in Afghanistan will be resumed only after the Afghan government is able to frame new mining laws.

The current uncertainties over mining laws in Afghanistan were a major roadblock for the consortium of Indian mining and steel companies taking a fresh look at their investment plans and renegotiations on projects hanging fire since 2011, a senior government official said.

The Afghan government had communicated its willingness to resume negotiations with the Indian consortium but the former had not yet been able to legislate new mining laws even after announcing such plans more than six months ago, the official said.

The Indian consortium had already pruned its initial planned investments from $10-billion to $1.4-billion to set up a one-million-tonne-a-year steel plant and develop the 1.8-billion-tonne Hajigak iron-ore reserves and allied infrastructure and logistical facilities.

While the initial bigger investment was negotiated soon after the Indian consortium bagged rights for development of the iron-ore reserves through competitive bidding conducted by the Afghan government, the scaled-down investments proposed now would require renegotiations of contracts, the official said.

However, such renegotiations could only resume after the Indian consortium was familiar with new mining legislation framed by the Afghan government, the official added.

The Indian investors were hoping that the new legislation would bring clarity to some of the contentious issues hindering firming up of the investments.

For one, the Afghan government had sought to have exploration work at the iron-ore reserves start within six months of signing a contract or the contract would be cancelled. It had been conveyed to the Afghan government that such timeframes were not feasible considering the infrastructure deficiencies and the security situation in the region.

The new mining laws proposed by the Afghan government were also expected to lay down norms for iron-ore export and the mandatory addition of value to ore within the country.

Initial plans were for setting up a six-million-tonne-a-year steel plant linked to the Hajigak iron-ore reserves but this had been scaled down to one-million tonnes a year. Hence, the smaller steel plant capacity would result in less value being added to the mined ore and, unless the Afghan government permitted higher exports of ore to India, the viability of the proposed investments would be lowered, the official said.

The Indian consortium was led by Steel Authority of India and included iron-ore miner, NMDC and other steel producers like JSW Steel, Jindal Steel & Power and Monnet Ispat.