India expects to attract foreign direct investment of Rs100,000 crore per annum in mining exploration of gold and diamond in the country.

Saying that though the country has a mineral area of 18.5 lakh sq km but lacks the technology and capital to harness their potential, union minister of state for mines Subbarami Reddy said that the new mining policy National Mineral Policy 2008 is expected to go through in next month's Parliament session.

An amendment to make the required changes in the existing Mining Act will be introduced in the ongoing session of Parliament. 

The Union Cabinet last approved the policy last week after a delay of two years, and aims to attract around $250 million in foreign direct investment annually in the mining sector in the next five years. 

He said that over a dozen companies from Australia, Canada and South Africa have expressed their interest in bringing technical expertise to identify the potential of a mining block, and Indian officials would soon visit these countries to explore the possibilities of more investment.

Reddy said that under the new policy, those who invest heavy-risk capital will automatically get the mining lease to enable them to protect their capital, while enabling India to achieve capital intensive mineral exploration.

He also said that global investors would soon be exposed to the potential rewards of the mining sector.  Once the new policy is finalised, Reddy said global entrepreneurs would flock India with technology and capital.

India produces 89 minerals, out of which 11 are metallic and 52 non-metallic. The country is estimated to have 2.92 billion tonnes of bauxite, or 10 per cent of the world's reserves, and 276 billion tonnes of coal.

India is also estimated to have 14,000 tonnes of gold reserves, but the country only produces three tonnes of the total annual demand of 800 tonnes, he said adding that the demand for gold is expected to rise to 1,200 tonnes per annum.

The new policy also aims to address a major complaint of investors by shortening the time taken for granting new mining leases by state and central governments to between six months and one year.  After this period, applications will be automatically referred to a tribunal.

Under the new guidelines, foreign and domestic firms would find it easier to invest in the exploration and mining of gold, diamonds and metals like copper and zinc, and prospecting companies will automatically obtain a mining licence.

Reddy also said that after the policy announcement, states would get more royalty, which would be decided on the basis of the selling price of the mineral against the present system based on volumes.