March 2019

Mining contributes to around 2.5 per cent of GDP. It could, however, contribute a lot more, given India’s abundance of natural resources and the focus on infrastructural development that guarantees strong demand for minerals. However, a combination of negative factors has hobbled growth in the sector.

India’s mines are mostly small and disorganised, using outdated traditional methods and outdated
technology. Exploration activity is minimal. There are issues related to poor regulation, land availability, shortages of skilled manpower, financial constraints, low productivity, and environmental concerns that lead to public resistance to projects.

On the positive side, policy changes that have taken place over the past few years should lead to
greater private sector participation, and encourage investments in mining that lead to the induction
of modern technology. The New Mineral Exploration Policy, 2016 clearly aims at private participation
in exploration. The framework spells out a strategy to ensure more comprehensive exploration and
reflects a changed mindset in terms of offering comfort to explorers.

The National Mineral Exploration Trust also encourages exploration activities and puts a check on illegal mining. The Sand Mining Framework, released in 2018, outlines the way states could work to reduce illegal mining. The recently approved National Mineral Policy, 2019, is designed to help mining grow sustainably.

The proposal to grant industry status to mining will boost financing and acquisition of mineral assets in other countries by the private sector. The new concept of rationalising and auctioning reserved areas that had been given to the public sector but not used, should incentivise private participation. There is also an attempt to harmonise taxes, levies and royalties and the GST is a good start.

The opening up of the coal sector to private entities for commercial mining and the removal of end-use restrictions from auctioned mines is another good step. Sadly, there has been a lukewarm response to the coal mine auctions, but that is due to the current stress in the steel industry.

On the ground, new digital technologies, more sophisticated equipment and better practices are coming into the sector and miners are skilling up workforces. But the pace needs to be accelerated. There is a need for the sector to internalise the policy reforms and start implementing more change on the ground. That will also require a great deal of investment. There is plenty of opportunity in the sector since demand will grow steadily in the long term. Committed policy support will be required to ensure that the sector grows quickly and sustainably without triggering environmental issues that translate into public opposition from civil society.

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