India possesses many useful minerals such as coal and limestone, and a whole range of ferrous and non-ferrous metals. These serve as raw materials and feedstock for key sectors like power, fertiliser, cement, etc.
Mining is therefore a vital activity. The sector is dominated by public sector enterprises with not too many private players. But policy changes could alter the landscape. There is a proposal to open commercial mining to the private sector from 2017-18 and the pros and cons of contract mining are also being debated.
A focus on productivity, cost efficiency and safety as well as efforts to reduce the environmental impact of mining could all be drivers for change. The policy initiatives embedded in the MMDR (Amendment) Act, 2015, National Minerals Exploration Trust Rules, 2015, and the MMDR(Amendment) Act, 2016 generally display a positive mindset.
Not all the developments over the past few years have been positive. Mining is still banned in some states and coal blocks have been deallocated (to be followed by fresh auctions). But the National Mineral Exploration Policy is clearly geared towards enhancing activity.
Growth has been sporadic and driven by the business cycle. Strong growth across the mining space in 2015-16 was followed by a flat performance between April and November 2016. A pick-up in the global commodity market is expected to drive demand for metals through the coming2017-18 fiscal.
Improved power sector performance should lead to more demand for coal. Construction needs to pick up before limestone mining (crucial for cement production) sees rising activity. Bauxite is being exported with domestic aluminium manufacturers complaining about a supply squeeze. Coal imports have fallen as domestic mining has picked up.
Equipment utilisation, automation and IT adoption are all at low levels. However, there are a large number of projects in the pipeline and it may be hoped that new entrants would induct new technologies and best practices. Investments in the range of Rs 1.5 trillion can be expected if all the scheduled projects come through. This would also lead to growth in associated areas such as the equipment market and in the internet of things, and the use of robots and artificial intelligence. Skilling labour to handle new smarter equipment will also be crucial.
The sector could witness expansion over the next few years as projects are launched and activity and employment pick up across the value chain. This assumes that policymaking will continue to be transparent and stakeholder friendly. This will be critical for creating a level playing field of the sort required to attract greater private sector participation.