The new policy clears the way for exploration and exploitation of gold and diamond reserves in the western and northern districts by joint venture companies with 5 per cent equity participation by the state-owned Orissa Mining Corp (OMC). The policy will allow OMC to tie up with global mining majors to explore for precious metals and stones. Prospecting licences will be given for an area of 10,000sq km to a JVC between OMC and a private party in which each holds 30 per cent of the equity.

The OMC will get to nominate the chairman, while the private party gets its managing director. In 1994, OMC had floated a global tender to select partners for joint ventures to prospect and mine for gold and diamonds.

Seven multinationals and one Indian company were shortlisted by the OMC last year. The MNCs are AshtonMining Ltd, Kimberley Diamonds Ltd, Cluff Resources Pacific, Ledger Resources, Empire Gold Mines, Dun Dee Bancorp Inc, Stockdell Prospecting Ltd and International Business Development Ltd.

The new policy allows foreign companies into gemstone mining as well. It specifies that private firms with sound financial standing, technical expertise and at least five years experience in mining are eligible to get gemstone mining leases. The lease holders should be able to invest at least Rs 1 crore, and to set up stone cutting and polishing units within five years of getting the lease.

Trading licences will also be issued to private firms or individuals or even gemstone mining leaseholders to carry out business with gemstones procured from villagers. The licensee has to pay a security deposit of Rs 1 lakh and an annual fee of Rs 1 lakh to the government. Apart from this, the licensee has to pay the state government a royalty of 10 per cent on the value of the gemstones collected.

Chief secretary SB Mishra said onMonday that the state cabinet has approved the policy and it would be given effect immediately. He said Orissa has half of India's total gemstones reserves, Madhya Pradesh has 25 per cent, and the rest is scattered over various states. Mishra said the United Nations Development Programme (UNDP) has identified 28 sites promising gemstones reserves in Orissa. Of these, 18 have been surveyed.

He said the 18 sites would be leased out very soon to private parties through tenders. OMC itself has applied for two of the sites, the chief secretary said. Preference would be given to OMC while considering applications for leases.

The gemstone sites are in Bolangir, Sambalpur, Sonepur, Kalahandi, Koraput, Nowapara, Malkangiri and Phulbani districts.

Rich gold reserves were found during a 1993 survey by Australia's World Geo Science, in Keonjhar and Mayurbhanj districts. Diamond pipes have been traced in Sambalpur, Phulbani, Bolangir, Boudh and Kalahandi.