This opinion brings out India's strength in geology, mapping, survey, mining and related expertise in its public and private sectors to creating a special purpose vehicle/joint venture in partnership to create an omnibus corporate entity that would compete globally with similar companies.

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Creating Special Purpose Vehicles/Joint Ventures to Create
a Global Indian Mining Giant
Shantanu Basu
India has built formidable domestic talent and infrastructure in exploration of
minerals and metals and various engineering branches. Although these were
initially public sector monopolies, post-1991, the private sector too has emerged as
a major player with its own HR talent pool. India has several State-owned (NMDC,
RSMMDC) and, now, private mining companies, in the copper (HCL), zinc
(HZL), bauxite (BALCO), and iron ore, coal (CIL, NLC, SCL), oil (ONGC, OIL,
GSPL, REL, GAIL) and uranium (UCIL) sectors as also 200-year old mapping and
survey organizations (GSI, SoI, BSI, AnSI, NHO, Ocean Development). It also has
large construction engineering (L&T, JIL, NBCC, and SPL), diverse large
equipment manufacturing (BHEL, HEC) and skill development (EdCIL)
companies that have several overseas milestones at their credit, such as large hydel
power projects in Bhutan. Over the years, many Indian companies have expanded
into Africa and the South China Sea and possess desert, mountain and offshore
exploration and construction capabilities too.
It is therefore, in the fitness of things, that India’s skills birthed newer integrated
entities – special purpose vehicles (SPV) or joint ventures (JV) - shared by
government (25%<) and private companies (>75%) for share capital and with the
fullest degree of operational autonomy. For instance, all non-oil and LNG mineral
exploration and engineering companies and departmental undertakings in the
private and public sectors could be unified under a new SPV/JV for global bidding
for overseas projects and delivering turnkey solutions in Africa. Likewise, energy,
engineering and survey companies (from manufacture to operations) may form
another SPV/JV. Similarly, government engineering departments could team with
private sector engineering majors in creating yet another SPV/JV for global
bidding for construction of large public infrastructure projects. Indeed, a set of 5-6
such SPV/JVs would project India’s diplomatic access with a strong economic
commitment.
The advantages would be manifold. For one, it would create skilled higher-paid
jobs at all levels in India and some for foreign nationals. Second, it would integrate
present standalone entities to synchronize their professional activity with fellow
entities in similar knowledge domains and synergize their respective strengths.
Third, even with higher overseas HR costs, the overhead cost of Indian companies
would remain appreciably lower than, say companies like Bechtel. Construction

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materials like cement, steel, other hardware, etc. could be transported by
capitalizing on a shipping industry that is close to starvation. In turn, this would
impart a fillip to our domestic industry and generate employment.
Fourth, were these SPV/JVs to operate in remoter parts of the world like Mongolia,
Central Asia, Eastern Europe, Central Africa, the Caribbean, etc. they may be
welcome owing to relatively cheaper Indian bids. In turn, such projects would
provide a sharper economic edge to our political diplomacy. Fifth, CPSUs like the
Shipping Corporation of India that are in economic distress owing to the global
downturn could have their bulk carriers hired by these SPV/JVs. Sixth, the HR that
is deployed by PSUs and government undertakings would obtain much greater
technical international exposure. Seventh, these SPVs/JVs could tie up with Indian
banks and FIs – public and private – for jointly financing overseas projects with
host governments. In return GOI could use a part of funds from ITEC and other
similar budget provisions to provide insurance cover, either by 50% risk insurance
premium or interest subsidy of 3-5% for domestic borrowing for overseas
investment. Alternatively, a one-time risk premium as share capital by GOI may be
contemplated.
Fifth, bidding globally may partly bail out India’s struggling infrastructure and
manufacturing industries. Ninth, contract agreements could be structured with host
governments/entities in a manner that part of revenues would be repatriated to
India in kind for sale, e.g. processed rare metals, LNG, etc. to form part of India’s
Strategic Reserve. Tenth, the professional and financial credentials of these
SPV/JVs and their shareholders would be strong enough to take on competition
from western global firms. Incidentally, even Bechtel Corporation employs a large
number of Indian personnel and operates in and from India too.
Lastly, extractions/assemblies, processed abroad, could be imported back into
India, converted to finished products like magnets and re-exported at a premium.
Rapid turnaround of such materials with just-in-time management would partly
offset costs ofstorage and disposalof hazardous waste and avert obsolescence. The
same would hold true for all other precious metals. These measures would be a
win-win situation for India and hedge against future fluctuations in prices apart
from providing better wages and develop the geographical areas in which new
assembling/manufacturing/storage plants would come up. Were the Govt. of India
to closely pursue other countries that produce rare earths and metals on similar
terms, India could emerge as the global giant warehouse of critical production
materials via these SPV/JVs.

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Central to the success of these SPV/JVs however, would be their real autonomy
from often stifling government contract and procurement and HR rules and
regulations and major issues of accountability, notably with CAG, CBI and CVC.
If these SPV/JVs were to have at least 51% management control vested in the
private sector with subsidy/insurance support conditional upon use of 75% Indian
non-human materials and subject to Indian laws within India, there is no reason for
them not to be successful in their endeavours. Government HR below the age of 50
years could opt for a one-time migration to these entities although their final
selection would remain the prerogative of the SPV/JV’s private management, with
governments continuing to bear pension liability, wherever applicable. Add-on
incentive scheme/ESOPs for new SPV/JV employees would also attract seasoned
talent and create a vested interest for best performance.
Admittedly, the world economy is facing strong headwinds that may make the first
few years for our SPV/JVs somewhat tough. Yet, ignoring the need to create such
entities with a distinct cost-advantage would be folly. It would also take at least 18-
24 months to create these entities and another similar time for them to become
fully operational. Hopefully, by then the global economy would have come out of
its present depressed state. India already has resources that could take it globally
and perform creditably. All it needs is the GOI’s initiative and support.