KOLKATA (miningweekly.com) - Indian government-owned mineral and metal companies have expressed doubts over their ability to take up exploration and prospecting projects as envisaged by the government.

Many of these companies, including major Coal India Limited (CIL), National Aluminium Company Limited, NMDC Limited and MOIL Limited (formerly Manganese Ore India Limited), have communicated to their administrating Ministries of Mines and Steel that undertaking exploration and prospecting projects would not only be economically unviable given the risks inherent in such investments, but also that the companies lacked the necessary technical expertise and equipment.

According to a senior government official tasked with reviewing submissions by various government mineral and metal companies, most of the views expressed had in common that there existed an inability to take up exploration and prospecting owing to the absence of a suitable financial and administrative environment for such investments.

For example, it had frequently been pointed out that any exploration and prospecting investments would have to source ‘risk funds’, while the current administrative environment of government companies, and the structure of the board of directors and of control by the respective Ministries did not make access to such risk funding feasible.

Simultaneously, a write-down of such risk investments on the balance sheet, in the case of a negative outcome, would be difficult have approved by the national auditors such as the Comptroller and Auditor General (CAG), under the current dispensation, the official said.

According to the feedback submitted, even though most government companies in mining and metal processing had extensive mining experience, they did not have the human resources and technical resources for prospecting and exploration, which required an entirely different set of expertise; if they were entrusted with such projects it would demand that the work be outsourced to foreign mining services companies.

For example, while Steel Authority of India Limited, the country’s largest steel producer was also the second-largest miner in the country after CIL, operating seven iron-ore mines, the company did not have adequate resources in terms of geologists, geophysicists or exploratory drilling, despite its extensive mining operational human and technical resources.

Furthermore, even if prospecting and exploration projects were to be undertaken, it would be based on existing data, which at present was considered to be sketchy at best.

The companies’ negative response came in the wake of a government directive last month to all its large mining and metal companies to undertake prospecting and exploration projects to facilitate backward integration of their current mining activities.

The government’s thinking was that opening up prospecting and exploration activities to government companies would rectify the dismal record of new discoveries across the country.

According to a 2014 Mines Ministry report, Geological Survey of India had identified 571 000 km² of geological potential across the country, but no project had been undertaken to explore this potential, largely owing to a shortage of technological and financial resources within government agencies.