AZAD KASHMIR MINERALAND INDUSTRIAL DEVELOPMENT CORPORATION
BARRIERS TO THE DEVELOPMENT
OF MINERAL SECTOR
IN PAKISTAN
Mining Operational /Technical Aspects
Including Geological Information
By:
Shaukat Jan Bachh
Secretary
Industries, Labor and Mineral development,
Govt., of Azad Jammu & Kashmir.
Muzaffarabad
December, 2003
1. INTRODUCTION
God created human beings in Heaven and sent them on earth to Live Right.
From the first day, he was told to search and utilize natural resources for his
survival. Till now as an individual or as a nation only those could survive
who followed this Command and hence they are economically sound and
prosperous.
Nature has endowed Pakistan with ample natural resources including
minerals. However, inadequate infrastructure, scarcity of capital and lack
of technical know-how foiled all efforts to tape and use them for
development and alleviation of poverty of the country.
For sustained economic development and to alleviate poverty among the
masses, it is obligatory to commence concerted efforts to explore, develop
and exploit mineral wealth in a scientific and planned manner. Unfortunately
the contribution of mineral sector to the GDP of Pakistan is less than 1%, in
spite of all the efforts shaped so far in this sector the required results could
not be achieved. This indicates that there are certain visible and invisible
barriers to the sustainable development of mineral sector in Pakistan, which
need to be identified and find ways and means to remove them so that this
sector could flourish and partake fully in the development of Pakistan.
2.
GEOLOGICAL SET UP OF PAKISTAN
With geological reference, Pakistan can be divided in to a: Southern
Volcano- Sedimentary and a Northern granitic and magmatic Region. This
division is necessary to look in to specific type mineral deposits in a
particular area or region. In Southern Region industrial mineral like coal,
rock salt, marble, bauxite, fire clay, bentonite, iron, manganese ores, barite
and similar kind of mineral deposits are expected. In this region, metallic
minerals include sedimentary-exhalative type lead-zinc deposits (like lead
zinc deposits of Khuzdar and Duddar) and Porphyry copper-pyrite deposits
like of Saindak. In Northern regions apart from metallic mineral, precious
and semi -precious stones in metamorphic and igneous rocks (pegmatites
etc).
Now, in light of new mineral policy, mining is to be undertaken by Private
Sector and no Provincial or Federal Agency is supposed to go for
exploitation of minerals, therefore the obstacles foreseen mainly relate to
this sector where Provincial and Federal Governments are also involved.
3.
PROBABLE BARRIERS TO DEVELOPMENT OF MINERAL SECTOR IN
PAKISTAN
Following barriers are identified which need to be eli minated in order to
develop sustainable mining culture in the country and enable it to
contribute considerably towards GDP. These obstacles include:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
3.1
Lack of geological know how
Unplanned mining
Insufficient technical staff
Lack of infrastructure in mineral rich areas
Paucity of funds
High transportation cost
Value addition.
Market- Demand and supply.
Local constraints and pressures
Political unrest
LACK OF GEOLOGICAL KNOW HOW
This is a cruel fact that Private Sector mostly does not involve in geological
exploration of minerals, even in their own Leased areas. They go straight
for unplanned mining to get quick return on their investment, which
shortens the life of the mineral deposit and thus most of the resource
remains untapped. As an outcome the Sector had to bear losses and the
mining is stopped.
Hence it is proposed here that Private Sector should acquire geological
information from the provincial or Federal Agencies (which should be made
mandatory upon these Agencies to provide free of charge, if available),
before commencing mining operations. In case, if such data is not
available, Private Sector should exert to create it’s own technical data by
hiring geologists and mining engineers on contract basis and appraise
mineral deposit, qualitatively and quantitatively. It would then lead to a
sustainable exploitation and supply of mineral to the market. In
consequence, local industrial sector dependent upon indigenous mineral
raw material would be encouraged and come forward to invest in Mineral
Sector.
3.2
UNPLANNED MINING
Subsequent to reserve estimation and suitability of a mineral for industrial
use, pre-requisite to commercial mining, is preparation of a Mining
Feasibility Study to ascertain production target from the mine as per
market demand. Unfortunately this fundamental requirement is ignored
both by Public and Private Sector. This delinquency has lead to unplanned
mining activities, resulting in the unsustainable supply of minerals to the
industry. Probably this is the main cause that so far no mineral based
industry could flourish in Pakistan. This unplanned mining practice also
shortens the life of a mine so full potential of a deposit cannot be utilized.
So it is emphasized here that commercial exploitation should be initiated
after Mining Feasibility has been prepared.
3.3
INSUFFICIENT TECHNICAL STAFF
It has also been noticed that the Private Sector does not hire technically
qualified staff to look after the mining operations, which leads to erroneous
mining sometimes resulting in heavy monitory and human life losses. It is
therefore recommended that surveyors, mining geologists and engineers
must be engaged for technical guidance before and during mining.
3.4
LACK OF INFRASTRUCTURE IN MINERAL RICH AREAS
This is also a fact that almost no infrastructure like roads and electricity is
available in most of the mineral rich areas. Due to this the prices of
industrial minerals are affected and many industrial minerals have to be
imported utilizing our meager foreign exchange resources. If infrastructure
like roads and electricity has to be provided by Mineral Sector alone, it
would make the mining of most of the industrial mineral uneconomical,
which already has low unit value. Therefore, it may be made obligatory to
the Provincial Governments to provide necessary infrastructure on priority
to mineral rich regions. These priority areas be defined by provincial
mineral exploration agencies. This not only on one hand would provide
motivation to the mining industry and would also help to raise the living
standard of people of these godforsaken areas.
3.5
PAUCITY OF FUNDS
It is also an established fact that heavy finances are required to evaluate
and develop a mineral deposit for commercial mining but as a practice
every individual or a party having meager financial resources obtains
Lease but is unable to incur huge investment for mine development and
subsequent exploitation of the mineral. Hence the Lessee quests for
investor. It is also observed that in most of the cases they do not reach to
equitable terms and as such due to scantiness of funds, the mineral
though having demand in the market cannot be exploited till the matter is
settled. We think that here the role of Licensing Agency is crucial and the
leases should be granted only to financially and technically sound parties.
In case, if a Lessee does not start work in due course of time without
genuine reason, the lease should be cancelled according to Mine
Concession Rules. In addition to this, loan facilities on soft terms by Banks
may also be extended to this sector.
3.6
HIGH TRANSPORTATION COSTS
It is observed that most of the mineral deposits occur in remote areas
away from market and in case of industrial minerals cost of transportation
becomes so high that local minerals sometimes cannot contend imported
minerals. In spite of the fact that this is an era of competition thus to save
foreign exchange, it is proposed to give subsidy or tax holiday on some
important industrial minerals for a certain period.
3.7
VALUE ADDITION
Value ad dition of industrial minerals, gemstones and decorative stones is
another important factor to substantiate Mineral Sector in Pakistan. It is
estimated that a cut gemstone fetches ten times higher price than an uncut
stone. Similarly the decorative stones like marble and granite if exported to
the international market after cutting and polishing,
It is recommended that all out efforts should be made to create facilities for
processing of industrial minerals, gemstone and decorative stones cutting
and polishing in the country. Export of minerals and gemstones in raw form
may be prohibited.
3.8
MARKET - Demand and supply
It is misfortune that even after 56 years of independence, no outstanding
mineral based industry could be established in the country except marble
and ceramic. This is also a bitter fact that there exists no price and quality
control system for minerals in the country. Similarly, there is no demand
and supply control system by which mining of minerals could be regulated.
For example, few years back Peridot, a semi -precious stone had a great
demand in the market, as a result everybody in Kohistan rushed for mining
without considering its impact on price in the market. As a result, tons of
Peridot was available in the market dropping the prices and the miners had
to bear losses.
So it is suggested that a Regulatory Body may be framed at Provincial
and/or Federal Level to take care of quality, prices and demand/ supply
position of various minerals in the country.
3.9
LOCAL CONSTRAINTS
As minerals are mostly located in far flung areas and sometimes in tribal
areas (in Pakistan), where it becomes almost impossible for a Lessee to
start mining without the permission of local owner of the land including
influential people of the area. Even though, provision has been in Mining
Concession Rules that District Administration would assist the Lessees in
this matter but in most of the cases influential people make all these efforts
ineffective. On the other hand, if Lessee ventures to settle the matter with
them, the terms and conditions offered by the owner of the land under
lease area are unacceptable to the Lessee. Thus matter is referred to the
court where this is delayed for years.
Under this situation, it is proposed that in case the Lessee and owner of
the land do not reach a settlement, the Licensing Authority, as assessed
by the Revenue Department, may gather a fixed amount monthly or yearly
from the Lessee. This amount would be other than the royalty and paid to
the owner of the land directly by the Licensing Authority.
3.10 POLITICAL UNREST
Another important factor is the political unrest, which has blocked
investment in industrial sector of Pakistan probably including Mineral
sector as well. So it is fundamental requirement that political atmosphere
may be made calm and peaceful to attract local as well as foreign
investment in mining.
4.
RECOMMENDATIOINS
In light of above, following are the recommendations:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
The Lease Holders must acquire geological and technical data from the
concerned Agencies before launching mining operations or arrange
themselves, if not available. These Agencies should also provide such
data (if available) on demand free of charge.
The Lease Holders should prepare Mining Feasibility before start of
commercial mini ng of a mineral.
The Lease Holders must hire full or part time technical staff for
management before and during mining.
Necessary infrastructure may be provided on priority basis to mineral
rich areas delineated by the Provincial Mineral Agency.
Leases should be granted to financially and technically sound parties to
whom soft loan facility may also be extended by Banks.
Due to high transportation costs, subsidy or tax holiday may be granted
on certain essential or import substituting minerals for a specific period.
For value addition facilities may be created for processing of industrial
minerals and gemstones in the country.
A body may be constituted to regulate quality, price structure and
demand/ supply of minerals in the country.
In case of dispute between Lessee and the land owner a fixed monthly
or yearly amount be gathered from the Lease Holder and disbursed by
the Licensing Authority.
Political atmosphere should be made calm to attract local and foreign
investment.