Mining sector likely to get status of industry

The federal government is likely to grant mining sector a industry status aimed at facilitating its development as per rules of provincial governments, sources in Petroleum Division told Business Recorder.

As per Constitutional provisions, minerals other than mineral oil, natural gas and nuclear substances and those occurring in federally controlled areas [Islamabad Capital Territory and offshore beyond the territorial waters] are a provincial subject. The provincial government is responsible for regulation of mineral exploration and production activities and grant of mineral titles for these operations.

The federal government is mandated with a facilitation role – geological surveys, formulation of policy/plan, fiscal incentives and coordination for minerals sector at national and international levels. Currently, more than 5,000 mines are operative in public and private sector producing chromite, ores of copper (+gold, silver), iron & lead-zinc, coal, rock salt, limestone, gypsum, barite, bentonite, fireclay, marble, granite, sand stone, emerald and ruby, etc. These mining operations employ over 300,000 people and are dominated by small-scale workings.

According to sources, there are a few large-scale mining projects and the contribution of mining sector to the country’s GDP is very marginal (one percent).

If effectively managed, the mining sector can play a pivotal/transformational role for social and economic development of the country/provinces and these natural endowments are estimated to have potential to safely add up to five percent to GDP.

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All Pakistan Mines & Minerals Association has insisted for recognition of the mining sector as an important pillar of economy through grant of status of “industry”. This proposition is argued to provide many advantages viz collateralization of mineral title/mining lease for credit facility by Financing Institutions, concessions in import duty on machinery and equipment, better weightage for establishing business joint venture/consortium, more support by the Government for infrastructure provision in mining areas, and priority for land acquisition, etc.

Furthermore, the government will be more focused to devise guidelines for plans on environmental, rehabilitation, re-settlement and skill development aspects. Resultantly, the investor confidence index will be increased and the sector will create larger space for job opportunities.

There is no specific law regulating the grant of status of industry to a business/economic activity. As defined under Section 2(xvi) of the Industrial Relations Act, 2012 [which deals with labour related issues], “Industry includes any business, trade, calling, employment or occupation for production of goods or provisions of services in the Islamabad Capital Territory and falling in more than one province, and excluding those set up exclusively for charitable purposes”.

The subject of “industries” was devolved to the provinces vide 18th Amendment in the Constitution. Several sectors had previously been declared as industry through various notifications mostly issued by the Ministry of Industries & Production during the years 1990-2009 and the same are as such offered following incentives/concessions: (i) exemption from mandatory minimum equity limits ($0.3 million); (ii) borrowing from State Bank in excess of its capital; (iii) tariff level on import of machinery equal of industry and business; (iv) tariff concessions on import of machinery not locally manufactured (five percent customs duty and zero percent sale tax applied); (v) specific concession on electricity & gas charges permissible to industry.

The Prime Minister’s Office constituted a high-level committee headed by the Federal Minister for Power with representation of Federal & Provincial Government Divisions/ Departments concerned and sector experts to suggest ways and means to optimally develop and utilize mineral resources. The matter was thoroughly deliberated upon in a consultative meeting with stakeholders and the Committee has recommended that the mining sector be granted recognition and status of an industry.

Although the regulatory authority for mineral exploration and production (natural gas & nuclear substances) vests in the provincial governments, the entire mining sector across the country will be granted status of an industry. Moreover, the aspects of credit facilitation and fiscal incentives relate to the Federal Government. Therefore, the matter is being processed by the Petroleum Division as per its mandate under the Rules of Business, 1973.

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