The mining sector is going through difficult times. During the first nine months of 2019-20, the sector grew by a meagre 0.6 per cent as compared to the 3.1 per cent growth during the corresponding period of 2018-19. The closure or suspension of a number of mines has led to massive job losses. Budget 2020-21 too has failed to allay industry concerns related to high duties on exports and other levies. That said, the government has a forward-looking agenda for the sector that is expected to open up opportunities across the board. Thus, hopes are pinned on 2020 and beyond.
Firming up regulations
In the past four to five years, the government introduced a slew of reforms to support the mining sector, the latest being the Mineral Laws (Amendment) Bill, 2020. The bill, recently passed in the RajyaSabha, is an important development as it aims to open up the coal sector for commercial mining. It also offers relief to new lessees as it extends the validity of the approvals, licences and clearances given to the previous lessee, for a period of two years. To attract greater participation, the “prior mining experience” requirement has been done away with under the bill. The National Mineral Policy, 2019, has been another landmark development aimed at promoting sustainable mining. Besides, the government has also relaxed foreign direct investment norms. These moves are expected to increase private participation in exploration and attract foreign investments as well. They reflect the government’s intent to give an impetus to the sector and make it lucrative for global mining players.
Opportunities across the value chain
The Indian mining landscape has been undergoing rapid transformation in terms of market participants, with greater mineral production coming from contract miners. This is due to the operational efficiency, productivity improvement, innovation and labour cost arbitrage that contract miners offer. Greater participation by these players is likely to continue.
Apart from exploration and mining, significant opportunities exist for mining equipment, technology and services providers. Coal India Limited (CIL), the largest coal producer, has a target of producing 1 billion tonnes of coal by 2023-24. This opens up opportunities for original equipment manufacturers to provide heavy mining equipment to CIL for scaling up production at large mines.
There is huge scope for increasing underground mining operations as the technique accounts for less than 10 per cent of the total output. Underground mining will no doubt gain traction going forward, given the depths at which mineral reserves are found. As the technique is equipment intensive, it presents a big opportunity for equipment providers. Further, it must be noted that heavy equipment will be required to carry out large-scale mining of coal and other minerals.
Emerging digital technologies, such as artificial intelligence and internet of things, as well as other technologies promise to revolutionise the industry in unimaginable ways. Among these, drones that perform in-situ scanning can prove to be very useful for exploration. Meanwhile, the demand for mining simulators, radio frequency identification tags for personnel tracking, and 3D mapping technologies has been rising. Technological integration in operations, especially for a developing country like India, is going to play a crucial role in its competitiveness in the international market, especially to endure price volatility. Technologies for zero-waste or low-waste mining are the next step in this direction. In India, most of the underground mines do not have a robust communication system. In such a scenario, a startup wholly based on establishing wireless communication in an underground mine can be evolutionary for the Indian mining industry.
The way forward
Auctioned blocks for coal and other minerals have been won largely by captive consumers, some as an outcome of restricted eligibility for bidding and others on account of economics that favour them. Auctions have also not yielded the desired results. Thus, shifting from a two-stage, ascending forward online auction to a single-stage sealed bid will help dampen aggressive bidding. Moreover, interventions such as introducing a seamless transition from an exploration licence to a mining licence, permitting sale of a licence at any stage, and allowing private companies to proactively approach the government for exploration areas will incentivise the private sector, as per the Confederation of Indian Industry. Royalty rates should be reduced in line with international benchmarks. Besides, the government must take the necessary steps to promote smart mining, deep sea mining and sustainable mining for long-term growth of the sector.