Under the new mineral policy, the federal and provincial governments have agreed to provide for appropriate institutional arrangements, a modern regulatory framework and a programme to expand geological database.

1. SUBMITTED BY: Ghulam Mehdi
(Balochistan University of Information Technology,
Engineering & Management Sciences, Quetta)
……………………Buitems,Quetta…………………………..
June 2012
Government of Pakistan
Ministry of Petroleum and Natural Resources, Islamabad, Pakistan.
Mission and Vision:

2. The Ministry of Petroleum and Natural Resources is entrusted with responsibility for policy
formulation, exploration and production planning, the provision of policy guidelines to the
provinces, and the coordination of the development of the mineral sector of Pakistan in order
to attract and sustain private sector investment. Our vision for Pakistan’s mineral sector is of a
strong, vibrant, and sustainable private sector driven mining industry contributing significantly
to our economic development.
Objectives of the Policy:
The Federal and Provincial Governments of Pakistan are conscious of their responsibility for
creating a favorable environment for an effective and vibrant mineral sector in Pakistan. The
Federal and Provincial Governments are also cognizant of the need to keep pace with the
changing international investment climate, and the important objectives which need to be
satisfied in order to secure foreign and local private risk capital investment into the mineral
sector.
The broad goals are to enhance the contribution of the mineral sector to the GDP by efficient
and sustainable development of mineral resources through private sector investment for the
benefit of the people of Pakistan. In order to achieve this goal, the National Mineral Policy – 2
aims to achieve the following:
i) Enhancement and sustenance of revenue flow to the Provincial and Federal Governments.
ii) Creation of an investment-friendly climate to enhance international competitiveness;
iii) Optimization of exploration, development and exploitation of minerals;
iv) Mitigation of adverse environmental effects of mineral development;
v) Generation of mass scale employment and socio-economic uplift through enhanced skills,
sustainable mineral development, technology transfer and regional infrastructure
development;
vi) Administrative restructuring of relevant federal and provincial mineral sectors;
vii) Generation of geological data, development of a national cadastre and provision of online
accessibility to such data; and
viii) Ensuring safe mining operations and safety and security of investor.
Summary of the Policy:
Under the new mineral policy, the federal and provincial governments have agreed to provide
for appropriate institutional arrangements, a modern regulatory framework and a programme
to expand geological database.
While the new policy envisages greater role for the provincial government through devolution
of federal corporations in the mineral sector like Pakistan Mineral Development Corporation
(PMDC) and Pakistan Gemstone Corporation, it also increases contribution by investors in the
form of taxes. At the same time, the crucial role of Geological Survey of Pakistan as a central

3. database organization has been protected while the federal government would have a say in
execution of agreements with international firms.
As required under article 172 of the constitution, the provincial governments have been
empowered to make rules for the grant of mineral concessions and titles in respect of any
mineral falling in its jurisdiction. The federal government has on the other hand committed to
provide a standard model agreement that would be followed by the provincial governments to
ensure reduced role of bureaucracy in dealing with grant of contracts and licences.
Article 172 requires that any property which has no rightful owner shall, if located in a province,
vests in the government of that province and in every other case, in the federal government.
All lands, minerals and other things of value within the continental shelf or underlying the
ocean beyond the territorial waters of Pakistan shall vest in the federal government. Also,
subject to the existing commitments and obligations, mineral oil and natural gas within the
provinces and the territorial waters adjacent thereto shall vest jointly and equally in that
province and the federal government.
The policy draft seeks to strengthen provincial institutions dealing with minerals and requires
setting up of provincial Mineral Investment Facilitation Authority (MIFA) to be headed by the
chief ministers or prime minister in the case of AJK.
On the same lines, a federal government would also have a MIFA to be headed by secretary
petroleum and representatives of planning, finance, states and frontier region, Pakistan
Environmental Agency, private miners and universities. The MIFAs would be responsible for
monitoring and facilitating mineral activities and help the federal government in negotiating
mineral agreements with foreign mining companies.
The federal government will make amendments in rules and laws to place mineral sector of
FATA, Islamabad capital territory and International Offshore Water Territories under regulatory
control of the petroleum ministry. A Geo-Data Centre of Pakistan will be established within the
ministry of petroleum to collect, keep, update and disseminate to provincial governments and
the industry the geo-data in standardized systemand coordinate with provincial mineral
departments, WAPDA , OGDCL and directorate general of petroleum concessions.
The federal and provincial governments would jointly formulate rules for licences of
reconnaissance, prospecting, exploration and mineral deposit retention and mining leases. As a
broad principle, the foreign companies will be free to apply for and be granted licences without
the need for local incorporation but would not get mining lease unless they are incorporated
locally.
The new policy changes arbitration clauses. In the 1995 policy, the resolution of disputes was
allowed to be directly taken to the international centre for settlement of investment disputes
(ICSID). The new policy requires disputes to be submitted to the procedures for sole expert

4. determination or arbitral or any other tribunal agreed in the each agreement before taking the
disputes to ICSID or International Chamber of Commerce. The local companies would resolve
their disputes through Pakistani arbitration tribunals.
The earlier policy envisaged 35 per cent corporate income tax on public companies and 43 per
cent for banking and private companies. Now the 35 per cent tax rate would be uniform for all.
The new policy has increased the minimum corporate tax from 0.5 per cent to one per cent of
the declared turnover while where the corporate tax exceeds this limit the minimum tax would
be charged.
The withholding tax on dividends paid has also been increased to 10 per cent from 7.5 per cent
unless protected by the avoidance of double taxation treaties. On the other hand, the rate of
withholding tax on non-resident contractors in construction and mining operations has been
brought down to six per cent from 15 per cent.
As a new measure, a 15 per cent tax shall be deducted from the gross amount paid to non-
residents on account of royalty and fee for technical services. An additional profit tax is payable
by large scale mining companies at agreed rates on the economic projection stipulated in
agreements through a three-tier mechanism. Where the rate of return is 15 per cent, the rate
of tax would be 10 per cent while the rate of tax would increase to 15 per cent and 18 per cent
when rate of return goes beyond 20 per cent and 25 per cent.
Some nominal charges have been introduced in the revised policy. These include Workers Profit
Participation Fund, Workers Welfare Fund, Workers Children Education Cess, Employee’s Social
Security Contribution, Employees Old Age Benefit and surface rent and compensation. All
dispatches of specified minerals from mines would also be subject to a cess or excise duty
ranging between Rs1-5 for each ton.
The mining companies would be exempt from customs duties and sales tax on import or
machinery, equipment, material, and heavy duty non-luxury vehicles provided these were not
sold locally without payment of normal taxes.
While the provincial government would be free to revise rates of royalty for coal, there would
be fixed royalty rates for other minerals ranging between 10-15 per cent for precious stones, 3-
5 per cent for precious metals and semi-precious stones, 2-5 per cent for base metals and 1-2
per cent for other metals and stones. The royalty in all cases would be determined on
advalorem basis instead of gross value.
Except for royalty, there would be no other provincial or local taxes and levies on minerals and
mining operations. The mining sector has also been granted a cover from complete protection
of investment and repatriation of profits and capital abroad like other private investments.

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