Local firms should be incentivised in oil production: Vedanta chief

New Delhi, Jan 9 (IANS) Oil and mining major Vedanta Resources founder and Chairman Anil Agarwal has expressed the hope that the forthcoming Union Budget will incentivise oil exploration by local entreprenaurs as well more mining of natural resources by the small and medium entreprises.

“We have to support local entrepreneurs so that we can increase the production contribution from them to 50 per cent from the current 30 per cent,” Agarwal told BTVi in an interview while responding to a query on boosting hydrocarbons production in India.

“It is very important to give a lot of comfort to local entrepreneurs. They will bring a lot of JVs (joint ventures) from outside to do oil exploration,” he said.

Oil and natural Gas Corp (ONGC) has “tremendous resources” and the state-run explorer is looking for tie-ups with suitable partners, he added.

Citing the example of aluminium, Agarwal lamented that while India produces only 10 per cent of the Chinese output, the Indian government has put a cap on production of minerals like iron ore.

“I am looking at the removal of these caps. Of course, the environment is also a very important consideration.

“Aluminium is so important for India, though we produce only 3 million tonnes (MT) compared to 34 MT by China, which is dumping half its aluminium in India. The steel industry has been protected by the government against dumping,” he said.

The Vedanta chief also said that it was necessary to bring in small and medium enterprises (SMEs) into mineral resource exploration through proper policy incentives.

“Banks are sitting on a pile of funds (post-demonetisation). It is very important to use SMEs to develop resources like aluminium, iron ore, oil and copper.

“Royalties, however, are currently very high and I am looking at whether they can be reduced, or can be tagged to production levels. The auction process for resources can also be simplified,” Agarwal said listing some of his other expectations from the government.

Noting the high operating costs for miners, he said railway freight rates were a major factor.

“Railways increase the freight rates for iron ore like anything.. railway freight rates need to be rationalised,” he said.

In this connection, Agarwal lauded the Shipping and Road Transport Minister Nitin Gadkari’s plan to develop waterways for transport as a measure that would reduce both the pressure on, as well as rates of, rail and road transport in India.