Daily Times

Institutional framework gaps: Pakistan’s National Mineral Policy (NMP) 2013 aimed to forge a comprehensive institutional framework to revitalize the nation’s mineral sector, positioning it as a pivotal contributor to the GDP. Central to this institutional design was the envisaged partnership between provincial and federal entities, intended to drive mineral exploration, investment facilitation, and sustainable development in unison. At the forefront, structures like the Provincial Mineral Investment Facilitation Authority (MIFA-P), led by Chief Ministers, and the Federal Mineral Investment Facilitation Authority (MIFA(F)), helmed by the Secretary of the Ministry of Petroleum, were introduced to harmonize strategies and actions across federal and provincial domains.

However, as the policy’s implementation unfolded, several gaps in the institutional matrix became evident. For starters, while the policy chalked out clear roles for these newly minted entities, it appeared to gloss over the integration with existing organizations. A notable mention here is the Pakistan Mineral Development Corporation (PMDC), whose role seemed overshadowed by the new structures, creating potential redundancy and overlap in responsibilities.

Moreover, the coordination machinery that was expected to synergize federal and provincial efforts appeared less effective in practice. Notably, the Mineral Investment Board, a consultative forum proposed under the NMP 2013, witnessed lapses in its operationalization. For an entity designed to facilitate investments and unify strategies, the absence of even a single convened meeting casts a shadow over its efficacy. Similarly, the GEO Data Centre of Pakistan, another pivotal institution championed in the policy, remained unestablished, hindering the standardization and dissemination of vital geo-data.

Pakistan’s 2013 National Mineral Policy, while optimistic in its aspirations, seems to grapple with significant gaps in its strategic framework.

In juxtaposition, international benchmarks, such as India’s strengthening of its existing Indian Bureau of Mines and Canada’s transition to a more strategy-centric approach, showcased how nations are evolving their institutional frameworks with a more iterative and forward-looking ethos. Pakistan’s approach, on the other hand, seemed to grapple with blending new institutional ideas with pre-existing structures.

Crucially, the backdrop of political instability, economic challenges, and security concerns in 2012-13, when the NMP was formulated, might have further complicated the institutional landscape. Without a robust groundwork that considered the nation’s prevailing circumstances and comprehensive stakeholder consultations, the newly proposed entities risked being out of sync with ground realities.

The institutional blueprint carried the promise of transformative change, but the gaps arising from a lack of integration with existing entities, challenges in operationalizing proposed structures, and potential misalignment with contemporary realities underscore the intricacies of building institutional systems that are both resilient and adaptive.

Fiscal Regimen: The fiscal regimen articulated in the policy draws a distinct line between the direct and indirect taxation mechanisms for mineral exploration and extraction, acting as a conduit to economic revenue for the nation. At the outset, the policy seems to maintain a parity of taxation rates for direct taxes with other sectors.

For instance, a corporate entity in the mineral sector is liable to pay 35 percent in corporate taxes, with other levies like dividends and additional profit tax attracting rates of 10 percent and 15 percent respectively. A salient aspect is the imposition of a 1 percent minimum corporate tax and a 15 percent royalty and technical fees. Interestingly, non-resident contractors are also roped into the fiscal net, being subject to a 6 percent tax.

When it comes to indirect taxes, there’s a sense of uniformity applied across the board. The mineral sector, akin to other industries, pays the standard rates for sales tax and excise duty. This broad brush of uniformity perhaps reflects an intention to treat mineral extraction and exploration at par with other industries in terms of indirect fiscal liabilities.

However, the policy does try to incentivize exploration activities. Machinery and specialized vehicles, vital cogs for exploration, are shielded from customs duties and sales taxes. Yet, this fiscal leniency is curtailed once we move from exploration to extraction and mine construction, with a 5 percent duty being applied. The policy further seems to tilt the balance against local manufacturers of mining machinery by levying a 10 percent import duty.

A mosaic of other levies and duties also finds mention in the policy. From religious obligations like Zakat to welfare-centric funds such as the Workers Profit Participation Fund and Employee’s Old Age Benefit, the policy encapsulates a broad spectrum of fiscal responsibilities for firms.

But as with any policy, critiques emerge when juxtaposed with its predecessor and the global scenario. A prominent observation is the congruence of the 2013 taxation scheme with the 1995 Mineral Policy. However, the 2013 policy relegates the taxation scheme to an annexure, possibly diminishing its obligatory nature. This relegation could be perceived as a dilution in the imperative nature of the fiscal responsibilities. Furthermore, on the global front, the corporate taxes in the mineral sector seem skewed. With an average of 28 percent being the international norm, the 35 percent levied seems to be on the higher side. This might be seen as a deterrent, especially when no exemptions are provided for technological upgrades. The policy’s ambivalence on clear royalty rates for mineral products further muddies the waters. The clarity and detailed nature of the previous policy on this front are sorely missed.

The fiscal regimen provides a structured framework for the mineral sector, certain aspects, like the comparatively high corporate tax rate and lack of clear royalty rates, could benefit from reconsideration, ensuring that the sector remains competitive and attractive to investors.

Thus, Pakistan’s 2013 National Mineral Policy, while optimistic in its aspirations, seems to grapple with significant gaps in its strategic framework. Firstly, the policy’s vagueness on infrastructure development, especially in remote mineral-rich regions, signifies a lack of groundwork. These regions, predominantly located in the tribal belts of Baluchistan and Khyber Pakhtunkhwa, are not only geographically challenging but also culturally intricate. For any successful mineral extraction, understanding and engaging with the tribal dynamics is crucial, but the policy misses addressing this complex tapestry.

Secondly, the sphere of research, development, and skill development is touched upon but without a clear, actionable path. The omission of leveraging international partnerships for on-the-job training and technological upgrades is a missed opportunity, especially considering Pakistan’s existing outdated quarrying methods. Furthermore, the policy’s stance on mineral value addition lacks depth. While it encourages the promotion of upstream and downstream industries, it falls short of delineating clear responsibilities and targets amongst the federal, provincial, and private sectors.

For a country like Pakistan, which boasts significant mineral reserves, a mere policy outline is insufficient. What’s required is a comprehensive, detailed, and culturally sensitive blueprint that not only sets ambitious goals but also maps out a clear, actionable pathway to achieving them.

(Concluded)

The writer works at a public policy think tank. He can be reached at saudzafar5@gmail.com