Speaking to reporters on the sidelines of the Indian Mining Summit organised by CII in New Delhi, Reddy said at present, the quantum of FDI flow into the mining sector was a paltry $150 million.
He said the government was targeting to attract Rs 1,00,000 crore (Rs 1000 billion) as FDI in the next two years and an additional Rs 50,000 crore (Rs 500 billion) contribution to GDP each year.
Reddy said the new policy would be presented before the Cabinet soon, after which it would be placed in Parliament.
The policy would be based on the recommendations of the Anwarul Hoda committee, which was formed to look into the Mining Act and to suggest policy changes in this regard.
He said the government was in favour of joint venture collaborations since the Indian partner would be aware of the local issues while the overseas collaborator would bring in technology and investments. Reddy hoped the Hoda recommendations would be acceptable to everybody.
Referring to the controversy over mineral-rich states not willing to supply minerals to others for setting up industry, Reddy said the new policy would also address the issue.
Under the new dispensation, if any state government failed to provide mining licenses within a considerable time period after application, the Centre would have the power to intervene and handover the same to the eligible applicant.
Reddy said the government's endeavour was to exploit natural resources to the nation's benefit. The minister said the new policy would also address the issue of social sector and added the target was create one million jobs in this sector.
Mining secretary A K D Jadhav said the mining sector should be accorded industry status, which would help in getting finance from banks and institutions.
The government was also keen to form a mineral development fund which would be formed by the royalty paid to the state governments while the Centre would give a matching amount.
