SOON after coming to power in Khyber Pakhtunkhwa in 2013, the PTI-led coalition government banned the issuance of new licences for mineral exploration. The move halted fresh investment, caused huge revenue loss and stopped job creation in the sector.

Mine operators are facing several problems due to an inadequate legal cover following the devolution of the subject to the provinces after the 18th amendment. Some of them have already hinted at shifting their investments to Balochistan. Critics say almost three years have been wasted in the formulation of new rules which are still to be announced.

The contribution of the mining sector to the provincial economy has historically been small despite its huge potential, says KP Minister for Minerals and Labour Anisa Zeb Tahirkheli. Currently, the province generates Rs800m in tax revenues annually from this sector.

All shortcomings in the mineral concession rules of 2005 will be amended to facilitate investors. It has also been proposed to incorporate strict penalties to discourage illegal mining

The tax revenue collection could touch the mark of Rs5bn keeping in view potential of the mining sector, the minister said. She admitted that the province was losing income because of a prolonged ban on the issuing of new licences.

She told Dawn that the new KP mineral licensing policy has been finalised in consultation with all the stakeholders. The draft rules have been sent to the law division for vetting. “Soon the draft will be placed before the provincial cabinet for approval,” the minister claims.

All shortcomings in the mineral concession rules of 2005 will be amended to facilitate investors. It has also been proposed to incorporate strict penalties to discourage the illegal mining.

The mineral development currently suffers from: a deficient regulatory framework, deficiencies in financial and technical expertise of mine operators, limited capacity of the mine and mineral department and scarcity of trained human resource.

The policy also proposes mechanisation of mining to discourage the outdated technologies which result in huge wastage of expensive minerals and introduction of the latest technology in the rental policy.

The mining sector is also on the verge of destruction due to land owners’ interference in mining operations and their ‘unfair’ demands. As a result, 80pc leases are inoperative. The new rules will provide a clear cut formula for governing relationship between the mine operators and their landlords and suggest appointing a magistrate for implementation of this provision. Also a tax policy is the part of draft rules.

According to an official report, KP has a huge reserve of industrial minerals and dimension stones, including marble, granite, and dolomite, as well as coal (ranging from lignite to bituminous) and limestone. Over 130 minerals have so far been identified.

There are over 400 current mining and 800 prospective leaseholders while the industry employees about 32,500 workers.

Almost all varieties of minerals — particularly exploration of dimension stones, gemstones and metallic mineral resources — provide avenues for investment in large and small-scale mining operations.

An important category of investment in KP is the opportunity for mineral based manufacturing industries, for example, limestone for cement industries. “We are expecting proposals from three to four cement factories after lifting of the ban on mineral exploration,” an official of the department said. Six or seven blocks of limestone have already been identified.

As many as 22m tonnes of fertiliser-grade phosphate have been identified in Hazara and about 85m tonnes of glass and ceramic-grade nephline syenite and associated granitoids in Buner.

The mineral department has received some applications which will be processed after the promulgation of new rules.

Published in Dawn, Business & Finance weekly, May 2nd, 2016