The growth in the Indian mining industry is being driven by infrastructure expansion, developments in the automotive and transport industries, advancements in manufacturing technologies, and the rising adoption of electric vehicles and battery storage. India has vast mineral reserves and the mining industry plays a vital role in supporting the economy. India produces around 40 major and 55 minor minerals, contributing about 2.5 per cent to the overall gross added value (GVA). Additionally, over the past five years, the domestic critical minerals market has doubled in size to around $320 billion.
Focus on critical minerals
While opencast mining continues to dominate, over the past few years, the Geological Survey of India (GSI) has shifted its focus from bulk commodities to deep-seated and critical minerals. Critical minerals are gaining significance in view of India’s commitment to energy transition and achieving net-zero emissions by 2070. In the current field season 2023-24, GSI has taken up 122 exploration projects of deep-seated and critical minerals such as gold, silver, copper, zinc, lead, nickel, cobalt and diamond. However, the domestic exploration spending is merely 0.3 per cent of the global expenditure, in contrast to other countries such as Canada (19 per cent) and Australia (12 per cent).
On the policy front, the government has introduced exploration licences for deep-seated and critical minerals through the Mines and Minerals (Development and Regulation) Amendment Bill, 2023. The bill further omits six minerals from the list of atomic minerals, thus opening up exploration and mining of these minerals for the private sector as well. Moreover, critical and strategic minerals should be rolled out with pre-embedded clearances. A minor mineral policy is also needed to maintain transparency across the central and state levels.
The government plans to make advance payments to private companies selected to explore for critical minerals. Around 30 per cent of the project cost would be paid upfront once the selected company, called Notified Private Exploration Agency, submits a bank guarantee equal to the value of the advance to the National Mineral Exploration Trust. Advance payments, a first in India’s mining sector, are expected to speed up the exploration of these minerals, in a country where mining remains dominated by public sector companies.
Investing in digitalisation and automation
Mechanisation of mining operations is a continuing trend as more and more mining companies turn to digital technologies and automation. Technological interventions and advancements are helping in increasing output, promoting sustainable resource usage, reducing fixed costs and enhancing workers’ safety. Artificial intelligence, machine learning, industrial internet of things, robotics, etc., also have several uses in this industry. Drones are increasingly being used for photogrammetric mapping of mines, 3D modelling, geological surveys, fault inspection, etc.
For ease of doing business, the Ministry of Coal has launched a SWCS (single-window clearance system) portal to obtain various clearances for the early operationalisation of coal mines. This will result in the augmentation of coal production in the country through a single gateway. This digital platform will also help manage bank guarantees, upfront payments and major clearances.
Decarbonisation and sustainability
The mining sector contributes approximately 1.9 to 5.1 giga tonnes of greenhouse gas emissions, accounting for 4-7 per cent of the global emissions. The emissions across the value chain of mining include a contribution of around 30-50 per cent from haulage, around 20 per cent from crushing, 7 per cent from dozers and about 5 per cent from excavators. Due to this, decarbonisation initiatives such as the use of battery electric vehicles (BEVs), renewable electricity generation and zero-waste mining are under way.
Major mining companies in India have also taken initiatives, which are more focused on green transportation, carbon offsetting and renewable energy generation. For instance, in 2022-23, Coal India Limited (CIL) and National Mineral Development Corporation planted around 3.1 million and 3.0 million saplings, respectively. Additionally, CIL has operationalised three sand segregation projects, while also creating eco-parks and eco-tourism sites. Meanwhile, Vedanta has set a target to decarbonise around 75 per cent of its mining fleet by 2035. It has also set an Internal Carbon Price of $15 per tCO2e. Hindustan Zinc Limited has entered into an MoU with Epiroc and Sandvik to introduce BEV for underground mines.
Sustainability has emerged as a key focus area for the industry and companies are increasingly adopting practices that reduce the environmental impact of their operations. Measures such as reducing water and energy consumption, minimising waste production and asset downtime, and preventing soil, water and air pollution at mine sites, are gaining traction. There is a growing push to use renewable energy sources at mining sites and electrification of the mining equipment.
Regulatory landscape and policy implications
In recent years, various policy and regulatory changes have been introduced in line with global trends. For instance, with the introduction of the Transition Towards 2030, Vision 2047 and the National Mineral Policy 2019, India’s mines and mineral industry is expected to reduce carbon emissions by 30–40 per cent by 2030. In November 2023, the central government launched the first tranche of e-auctions of 20 blocks of critical and strategic minerals, which include blocks of lithium, rare earth elements, platinum group of minerals, nickel and potash. This is expected to promote the exploration of new-age minerals.
Moreover, the government has introduced a revenue sharing model according to which a 50 per cent rebate in revenue share is applicable on early production of minerals. Due to this, the production of key minerals such as limestone, iron ore and bauxite has increased in the past three years. Further, strategic collaborations such as the Mineral Security Partnership and India-Australia Comprehensive Economic Cooperation Agreement have enhanced cooperation in securing the supply chain of critical minerals for the member countries by facilitating investment in identified blocks of these minerals in resource-rich countries.
Pain points
Obtaining permits, licences and approvals have historically been associated with lengthy processes, leading to significant delays. Around 89 per cent of the Environmental Impact Assessment are recommended beyond the prescribed time of 105 days for obtaining environmental clearances. Another key challenge is the difficulty in the possession of land and evacuation constraints from upcoming greenfield areas. Nearly 50 per cent of the skilled engineers in the sector are reaching retirement age in the next decade. Of the 6,446 institutions offering engineering and technology courses, only around 168 institutions directly address mining. Hence, the lack of skilled workforce is an issue. Despite the progress made in terms of technology penetration, the adoption is still slow and limited.
The way forward
Going forward, the government has set a target of increasing the mining sector’s contribution to GDP from 2-2.5 per cent to 5 per cent by 2030. There lies a huge opportunity for various stakeholders in the mining sector in India.
The industry’s future focus will be on improving production in a sustainable manner. For this, a mandate to provide a certain percentage of earned profits for a research and development fund would benefit domestic mining firms. To achieve growth, partnerships with international players are key for setting up downstream industries. The setting up of critical mineral processing plants should also be incentivised. On the policy front, a framework must be set up for ranking states in terms of policy potential index and mineral potential to attract foreign investments.
With inputs from a presentation by Rajib Maitra, Partner, Consulting, Deloitte Touche Tohmatsu India, at a recent Indian Infrastructure conference
