Govt to mine and export raw minerals for revenue through the State Mining Corporation

One big but brief and barely noticed announcement in the Prime Minister’s state of the nation address was the government’s plan to form a State Mining Corporation (SMC) that would export minerals to India and Bangladesh.

This paper has learnt that, though in the early stages, the Ministry of Economic Affairs (MoEA) as the parent ministry is in the process of setting up the SMC, which in a policy break from the past, will be exporting raw minerals.

The MoEA Minister Lyonpo Norbu Wangchuk confirmed this saying that the idea for SMC had been generated around two months ago and it will be a model mining company that will take the lead in the mining sector.

Apart from the development of the mining sector the SMC would help increase Bhutan’s exports and earn Rupee or convertible currency to help Bhutan deal with the economic crisis, according to the minister.

“Bhutan has rich mineral deposits waiting to be used and capitalized and therein lies the solution to a lot of our economic challenges but unfortunately the mining sector has not been able to come of age even after 30 to 40 years and its contribution to the GDP is still minimal,” said Lyonpo.

He said that there were also a lot of issues with mining in terms of environment, inequity, allocation, benefits not coming to the country, doubts expressed by society, intergenerational equity and also the emerging case of communities getting overzealous in stopping all mines.

“Looking at the challenges SMC seems to be the way forward for us as SMC needs to show the country and the private sector how mining is done in terms of mining technology, transparent allocation process, environmental protection, interface with the community and generally leading the mining sector,” said the Minister.

However, the closer that the government comes to forming the SMC loud protests are expected to be heard from the 81 or so odd mine owners who could allege that the government, instead of regulating the mining sector is getting into the business of mining.

Here the minister responded by saying that Bhutan’s mining sector is big and unexplored enough to have more players and even the presence of the SMC would not affect the private miners. He also said that while the government would welcome serious miners it had no space for ‘rat-hole’ miners.

Lyonpo said that the SMC would also have some unique mandates. Unlike other private mining companies it would be engaged in prospecting for minerals by developing a highly skilled expertise. It would also be engaged in mining of strategic minerals which cannot be entrusted to private companies.

“The strategic minerals would be those that have great value like gold etc or those which are needed in the future like for example coal which is an important mineral needed for cement plants. As we have a requirement for cement we should not run out of coal which cannot be entrusted to the private sector,” said the minister.

He also said there would be many deposits where communities would object to private miners but not the SMC as it would benefit the nation at large.

The minister pointed out that SMC would be one of the major solutions to solving the rupee shortage as Bhutan had large quantities of minerals like Dolomite in the billions of tonnes which would last for more than even 10 generations even if exported by SMC in huge quantities. The minister said that SMC was a low hanging fruit that the government could capitalize on.

The SMC would also require a major policy shift from the earlier government’s policy of not allowing export of raw minerals.

The minister said, “There has to be a policy shift because the strategy of a blanket policy or rule that everything must be value added causes a huge problem of locking up some minerals which by nature are best sold raw.”

He said that in such minerals, Bhutan does not and would not have the scale of operations or the efficiency to value-add, and thus it would make more sense to sell it raw. He said value adding and processing may in fact lead to more environmental pollution. The minister also said that with technological advances some minerals could become redundant in the future if not exploited now.

Lyonpo said that one or two minerals may need some value adding but not all. He said that the government instead of coming up with blanket rules would study the case mineral by mineral given that Bhutan had around 10 major minerals and then accordingly see if value addition is needed for each of the minerals.

There are, however, those who would question if the SMC would be duplicating a function that the Natural Resources Development Corporation (NRDCL), under Druk Holdings and Investment (DHI), is already performing or mandated to perform.

The minister said that since SMC requires specialized expertise, and since the mining sector had so much potential a separate corporation was necessary.

The SMC, according to the minister in the setting up phase would initially be under the government but once it obtains maturity then it would be given to DHI or the NRDCL.

The Minister said that neceassry changes would be made in the draft Mineral Development Policy which was also being reviewed. Apart from relooking at the value addition part there may be changes in the policy in terms of the allocation process, regulatory instruments, community clearance and others.

Meanwhile the NRDCL, CEO Karma Drukpa said that at the movement the NRDCL has its mandate limited to the supply of wood, sand and stone and NRDCL has not yet gone into minerals.

DHI, Chairman, Dasho Sangay Khandu said, that the formation of SMC would depend upon what are the mines that are required. He said that there are a few mines which have already been studied by the Department of Geology and Mines though the feasibility study of the mines may not have been done and a lot more work would be needed,

The Chairman said that SMC may be set up as a separate corporate body or it could be given to NRDCL.

He said, “As far as DHI is concerned the responsibility for SMC will be entrusted with the DHI and once we get a clear understanding of how the government wants to operate then we will see whether it should be given as an additional responsibility to NRDCL or a separate corporate body should be set up.”

The Chairman further said that as per the Royal Charter, DHI has the mandate to implement all future commercially oriented projects that are developed by the government and the shares of the company should be transferred to DHI upon the formal incorporation.

He said that only in the case of the inter-governmental hydro projects, since two governments were involved an Authority would be set up but in case of commercial projects like Dungsam DHI had to be involved from the inception stage.

Dasho also said that DHI was awaiting clear and official directives from the government on the SMC.

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