March 2020

India’s mining sector has never performed to its innate potential because it has been hobbled by many negative factors. While the country possesses substantial natural resources, mining has always been a low-tech undertaking. There are almost no investments in exploration and there are restrictive policies that prevent the entry of private sector capital and expertise. Moreover, clearances take a long time and there are restrictions on end use. In addition, judicial interventions have halted operations in states like Goa, Karnataka and Odisha.

As a result of all this, mining remains substantially a government-dominated enterprise, with low productivity operations. Some recent policy changes along with enabling legislations though could make a positive difference.

For example, the Mines and Minerals (Development and Regulation) (Amendment) Act, 2015, mandated that some mining leases would expire in March 2020. The Mineral Laws (Amendment) Ordinance, 2020, was enacted in haste to allow auctions of iron ore licences before the expiry. Also, in September 2019, 100 per cent FDI under the automatic approval route was permitted for the sale of coal and in coal mining activities, including associated processing infrastructure. This could ease fund flows.

The Mineral Laws (Amendment) Act, 2020, could also help open up the coal sector for commercial mining. It offers relief to new lessees by extending the validity of approvals, licences and clearances given to the previous lessee. The National Mineral Policy, 2019, has been another development aimed at promoting sustainable mining. The National Mineral Exploration Policy of 2016 (which was the precursor to the National Mineral Policy, 2019) also targets the flow of private sector investments into exploration.

Apart from exploration and mining, large opportunities exist along the value chain for mining equipment makers and for technology and service providers. New digital technologies such as AI and IoT could help revolutionise the industry. The induction of drones for surveys, RFID tags for personnel, improved communication systems and 3D mapping are other areas of promise, going by best practices across the world. A shift towards zero-waste or low-waste mining would be another important step in enhancing productivity and competitiveness.

By some estimates, India has successfully exploited less than 20 per cent of its resources. It has a minuscule expenditure on exploration. Technology induction too is low. The changes in policy indicate that policymakers are aware of the issues and are attempting to alter the sector dynamics. It remains to be seen how the reforms work out on the ground.

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