The mining sector is one of the core industries of the economy, as its mineral and metal reserves can be leveraged to enable infrastructure development. So far, the mining sector’s contribution to the country’s gross domestic product has been limited due to underexploration of its geological potential and the decreasing per unit expenditure on exploration. The share of the mining and quarrying sector in the gross value added (GVA) has declined from 2.7 per cent in 2014-15 to 1.6 per cent in 2020-21. The decline in GVA in the mining sector between 2019-20 and 2020-21 can be attributed to the Covid-19-induced lockdown, which led to the halt/slowdown of production activities across various mines. As per the second advanced estimates for 2021-22, the GVA at basic prices for mining and quarrying (at the current price) contributes 2.4 per cent to the total GVA, indicating a recovery to pre-Covid levels and a growth in the mining equipment market as well.
Equipment such as electric rope shovels, hydraulic excavators, rotary/percussive drill machines, backhoe and wheeled loaders, bulldozers, shovels/hydraulic shovels, excavators, draglines and dumpers are used for various activities involved in mining.
Market size of mining equipment
According to India Infrastructure Research, the estimated market size of excavators is expected to be around 560 (in number), and dumpers (including haul trucks) to be around 13,966 during 2020-21. The market size of drills and other auxiliary equipment is estimated at 201 and 1,192 and the sales of rigid dump trucks stood at 682 units in 2020-21, while wheeled loaders recorded sales of 2,326.
The average annual utilisation hours of some key equipment in large mines (both opencast and underground techniques) are expected to be around 70-80 per cent (in the best scenario). The factors that affect utilisation of the mining equipment include unforeseen conditions, which are dynamic, with many unknowns that have a huge impact on equipment utilisation. Apart from this, the lack of availability of spare parts reduces the utilisation level. Meanwhile, drilling, blasting, loading, hauling and dumping makes the mining process more prone to lower utilisation if even one of the components in the chain breaks down. Thus, the utilisation of equipment in one sequence depends on the utilisation of equipment in the preceding sequence.
In 2021-22, Coal India Limited (CIL) concluded contracts worth Rs 17.44 billion for installation and commissioning of eleven 20 cubic metre electric rope shovels and nine 10- 12 cubic metre diesel hydraulic shovels. This equipment plays a critical role in CIL’s opencast mines in production and overburden removal. Meanwhile, 400 old and outlived major heavy earthmoving machineries were surveyed off and 42 shovel, 428 dumpers, 63 dozers, 25 drills and 9 surface miners were commissioned during 2021-22.
Key emerging trends
Some of the emerging trends that impact the mining equipment, which have been observed in recent years, include a shift towards sustainable mining and leasing of equipment as a business model. Mining companies are moving towards net zero emissions and aligning mining practices with their environment, social and corporate governance goals, thereby increasing the adoption of sustainable and energy efficient mining practices and solutions. Meanwhile, there has been an apparent trend towards leasing and rental of earthmoving equipment. Traditionally, the leasing segment of the market has been small, but it is expected to grow due to flexibility in financing and tax advantages. The “pay-as-you-use” model is picking up in India, as it minimises costly breakdowns and eliminates storage costs.
Further, the adoption of new-age technologies in the equipment market and the use of varying sizes of equipment are other trends that have been observed. In order to increase operators’ comfort and reduce fatigue, the ergonomics of the equipment have been improving. Equipment manufacturers, apart from making efficient, robust and reliable machines, are also fitting equipment with high-end user-friendly technology solutions, which allow operators to perform their job more efficiently and enhance productivity. Technological advancements to improve the health and safety environment for mine workers are also gaining traction. In line with this, and to ensure safety and protect equipment loss in opencast mines, a dumper collision avoidance system (DCAS) has been developed indigenously and successfully deployed at the KDH opencast mine of Central Coalfields Limited.
Moreover, with the growth in the size and scale of projects, large equipment is increasingly being used. This provides economies of scale and helps contain the cost of operations. However, smaller-sized equipment is also often used because of the cost economics and operational flexibility with the growing preference for the outsourcing model.
Growth drivers
The mining equipment industry in India is highly fragmented, comprising the organised segment (consisting of large private firms that cater to small-, medium- and large-scale projects) and a host of stand-alone private contractors in the unorganised segment, which operate on a small scale.
Key policy developments such as the Mines and Mineral (Development and Regulation) Act, 2021 are expected to spur growth in the mining sector, thereby driving the demand for mining equipment as well. Meanwhile, emphasis on lean and sustainable mining practices in order to reduce the carbon footprint is expected to enable innovation and technology upgrades by equipment manufacturers. Further, deeper and larger-scale mining operations will require high capacity equipment. Apart from this, private commercial mining will enhance competition and productivity by facilitating the use of the latest equipment with automation and improved technological features.
Challenges and issues
Some of the key challenges faced by the mining equipment market are cost competitiveness and equipment financing. With mine operators (especially government clients) opting for lower-priced equipment, standardisation of equipment prices becomes a huge problem. It is challenging for equipment manufacturers to price their products in a manner that they achieve profit margins as well as remain cost competitive. Meanwhile, the procurement of equipment takes up a significant share of the investment outlay of a mining firm. If cash flows are low and the overall growth in the sector is tepid, the procurement of new equipment becomes a challenge. Further, with the increasing equipment inventory, costs of regular maintenance and working capital cycle also increase.
Apart from these, other challenges faced by the mining equipment market include limited information technology and automation, lack of availability of spare parts and assemblies, procedural delays in equipment procurement such as regulatory and administrative procedures of mining companies. Also, the lack of skilled workforce, which ultimately lowers the utilisation level of the equipment owned by a company, poses a major challenge.
Future outlook
Almost all areas of the mining industry were affected by the pandemic on account of production shutdowns, supply chain disruptions, cash flow issues and a reduction in demand. The disruptions in the supply chain and manufacturing activity caused delays in processing orders by mining equipment companies. However, the mining industry is now recovering to pre-Covid-19 levels. The future of the mining equipment market in India looks positive, backed by opportunities in underground and surface mining. Meanwhile, the government has enhanced its focus on commercial mining, which is set to provide a boost to the mining equipment sector. In addition to this, mining reforms have helped the sector by streamlining business processes and giving a boost to productivity, employment and revenues.
In a bid to cater to the expected rise in demand and help in the infrastructure transformation of India, mining equipment manufacturers have set ambitious goals. Going forward, automation is expected to play a greater role in the mining equipment market. This is expected to be supported by internet of things and other technological advancements, leading to increased operational efficiency. CIL is targeting the use of environment-friendly technologies and equipment, with optimal capacity and improvement of existing technologies. In 2022-23, CIL is planning to procure high capacity equipment with an investment of more than Rs 22.77 billion for enhanced coal production in the coming years.
