March 2018: EDITOR Devangshu Datta

EDITOR Devangshu Datta

Mining is the backbone for multiple manufacturing sectors and it is also the source of various metals, limestone and coal and other minerals. India is fortunate in that it has an abundance of many key ores and minerals. However, the mining sector is underdeveloped and heavily dominated by the public sector. Mining accounts for only about 2.3 per cent of the GDP and underground mining accounts for less than 10 per cent of total output.

The sector suffers from multiple issues and faces many challenges. In addition to the usual problems with land use and environmental issues, the sector requires regulatory policy reviews. The current players are inefficient and undercapitalised. The lack of investment impedes exploration as well as the development of existing facilities. Mining is also short of skilled manpower and the lack of modern equipment makes it difficult to adopt modern mining techniques. There is insufficient IT penetration as well. The sector has a poor safety record, with many accidents. It is also plagued by illegal operations. As a result, private enterprise is wary of entering the sector.

Attempts are being made to try and change current practices and there is the promise of improvement in regulatory policy. For example, coal mining has been freed from multiple constraints in the past three years and the private sector is now being allowed to enter the segment in a big way, with a transparent auction model and no restraints on end use.

The draft National Mineral Exploration Policy is also likely to encourage exploration since it offers corporates the right of first refusal at the auction of any area explored by them. It also offers a revenue sharing model and emphasises the dissemination of baseline geoscientific data. The GST will also help to streamline the tax structure for the entire sector.

Relatively quick economic growth is leading to greater demand for minerals from downstream industries and from the rise in construction activity. Typically, growth in sectors such as power, automobile
manufacturing, cement and steel will generate demand for a range of primary minerals.

Underground mining is bound to gain traction, and along with that, equipment providers and manufacturers should find enhanced opportunities. Automated mass production technologies are likely to be adopted as private sector investment enters the sector. Contract mining, with the deployment of modern methods, should also increase if the new policy is properly implemented.

Massive infusion of capital and know-how is required to boost the sector’s productivity and reduce environmental impact. The private sector can provide these resources, especially if global majors get interested. But major improvements in regulatory and institutional capabilities are required to ensure a level playing field that would attract such players.