REGULATION OF MINING IN INDIA: A PATHWAY TO ACHHE DIN!!

Policy & regulation of mining should reflect commercial responses

to market signals and address the need for recognizing mining

as an industry to enable focused and free growth of the natural

resources sector in India

The development of civilizations from

the dark ages till modern days has

always been indicated in terms of

the metals and minerals perspective.

Since times known as the ‘Bronze

Age’ to what came to be known as the ‘Iron Age’,

metals & minerals have had a great impact on

human civilization. The advent of iron after the

Bronze Age brought with it greater capabilities

to humankind in strengthening various aspects

of human civilization, from cultivation to

hunting to exposure to machinery.

The Iron Pillar at Qutab Minar in India stands

tallest among civilizations who perfected the

Iron Age. The technological advancement in iron

in India is apparent from the rust and damagefree

pillar of iron made in India centuries ago.

Following the Iron Age, the modern era of

industrialization and development started with

the use of steel which we have seen as the

‘Steel Age’. In India, the TATA Iron and Steel

Plant marked the process of industrialization,

signifying a march towards Modern India.

India is ranked as having the 3rd largest mineral

reserves in the world. Foreign Direct Investments

(FDIs) in Indian mining, exploration of metal and

non-metal ores including diamond, gold, silver,

permitted precious ores and related sectors

including manufacturing of equipments etc.

are permitted up to 100%, subject to the Mines

and Minerals (Development & Regulation) Act,

1957. However, despite 100 percent FDI being

permitted in the mining sector, mining accounts

for only 0.7 percent FDI inflow in 2000-17.

India’s geological setup is similar in many ways to that

of natural resource-rich countries like Canada, Australia,

Brazil, South Africa, Chile and Mexico etc.

Apart from having the potential of generating capital

employment of about INR 1.21 Trillion, mining alone

can drive Foreign Direct Investment (FDI) up by

INR 500 Billion. In addition to saving nearly $58 Billion in

Foreign Exchange spend on imports of minerals including

iron ore, coking coal and thermal coal by 2025, mining

has the potential to generate an additional 6 million jobs

over the next decade, thus potentially resulting in the

acceleration of job creation by over 10%, which is expected

to move a large section from poverty line to the path of

empowerment.

The Smart City initiative covering

creation/transformation of 100

smart cities is presently in the

implementation phase. The major

part of the estimated initial budget

of approximately INR 1.9 Trillion

for 90 smart cities is expected

to be incurred on steel &

metals requirements. The smart

cities which will be equipped

with world-class infrastructure,

have pushed India’s need

to up its average annual steel

output by 9 percent between

2017 and 2021. India’s per

person steel consumption needs

to move up much closer to

China’s 493 kg per person from

India’s 63 kg per person, as per

2016 figures.

In addition to impact on

the increase in demand for

steel, potential upside in the

demand for other metals and

minerals has led to many start-ups mushrooming in

the mining space ranging from technical assistance

service providers to technology consultancies in

addition to downstream suppliers to mining equipments

and mining equipment manufacturers. This trend

indicates the huge potential being seen by all stakeholders

in the mining space on minerals such as coal, iron

ore and bauxite etc. owing to India’s thrust on power

production, infrastructure development and indigenous

manufacturing. Sector Skill Councils are also working

overtime to train 500 million workers by 2022 in order to

meet the demand and supply gaps of skilled workforce in

the mining space.

This explains why mining has been the center of focus of

the “Make in India” initiative of the Government of India.

The regime for grant of Mineral concessions (Mining

Lease & Prospecting Licence cum Mining Lease) through

auctions for companies interested in mining or for the

raw material for their downstream industry was an

attempt to simplify the procedures in the mining space.

However, has the simplification resulted in ease to do

the business of mining in India? Not really, if the miniscule

FDI in mining or the slow pace of growth of the mining

sector are taken as relevant indicators so far. As per

published data, export of ores and minerals increased by

27% over the previous year during April-October 2016-17,

whereas the export of base metals declined by 6.25% during

the same period. Import of ores and minerals stood at

10.6 million during April-October 2016-17, which was

lower by 18% over the same period in the previous year.

Even in the base metal segment, the imports during

April-October 2016-17 stood at 12.4 million dollars which

was lower by about 17% over the same period in the

previous year.

Mining being an indispensable

sector of the Indian Economy and

the cornerstone of the Economic

Development outlook of India.

Therefore, to meet the increased

demand in requirements of

metals & minerals towards the

development vision of India

towards Vision 2025 and beyond,

there is a need to rework the

policy framework and ecosystem

in the mining sector in India.

A recent draft minerals policy

circulated by the Government of

India seeking to enhance ease to

do business of mining in India is

an opportunity to achieve a lot

in this direction.

While the Mineral Policy 2008,

presently in force, seeks to

encourage private investment

in exploration and mining, the

gap between mineral wealth

versus optimum utilization still remains to be filled to

plug our bleeding foreign exchange reserves, apart from

other hardships which are impediments to the economic

development of India as a result of dependence on imports

for meeting India’s mineral needs. Despite improvement

in the policy environment in the past, the share of mining

in India’s GDP has barely increased since 2015 (about 2.2

percent of GDP compared to 8.1 percent in South Africa and

7.7 percent in Russia).

An increase in the production of iron ore from 192 MT

to over 500 MT in the next decade could up the share of

mining in GDP. This will not only meet requirement of

raw material input as per the National Steel Policy but

also contribute to current policies such as the Pradhan

Mantri Make in India Yojana, Pradhan Mantri Awas Yojna

(Affordable Housing for All by 2022) and Pradhan Mantri

Ujjwala Yojana (LPG for BPL households). Likewise, the

increase in domestic mineral production would contribute

to domestic procurement of many mineral resources required for mobile communication and renewable energy

industries. India has the third largest rare earth mineral

concentrates (after China and USA) and the third largest

deposits of chromium (after South Africa and Kazakhstan)

which are critical to both the mobile communications and

the renewable energy industries.

required for mobile communication and renewable energy

industries. India has the third largest rare earth mineral

concentrates (after China and USA) and the third largest

deposits of chromium (after South Africa and Kazakhstan)

which are critical to both the mobile communications and

the renewable energy industries.

1. Mines & Minerals (Development and Regulation)

(MMDR) Act, 1957 along with its amendments;

2. Mineral Concession Rules (MCR), 2016;

3. Mineral Conservation & Development Rules (MCDR),

2017;

4. Minor Mineral Concession Rules of various States;

5. Offshore Areas Mineral (Development & Regulation)

Act, 2002;

6. Offshore Areas Mineral Concession Rules, 2006;

7. The Mineral (Auction) Rules, 2015;

8. The Mineral (Evidence of Mineral Contents) Rules, 2015;

9. Mineral (Non-Exclusive Reconnaissance Permit) Rules,

2015;

10. The Mineral Conservation and Development Rules,

2017;

11. Forest (Conservation) Act and Rules, 1980;

12. Cess and other Taxes on Minerals (Validation) Act, 1992;

13. Mines and Minerals (contribution to District Mineral

Foundation) Rules, 2015;

14. Conservation rules for specific minerals like – marble,

granite etc.;

15. Orders of Various Hon’ble Courts;

16. Applicable National Mineral Policy.

It is necessary to align the roadmap of the mineral

sector with the future economic outlook of the Indian

Economy by creating the right policy environment

that (a) sets out a clear mining roadmap; (b) provides

for a single window clearance; (c) resolves environmental

issues efficiently; (d) sets out clear guidelines for

mineral funds and (e) provides a simple mechanism for

settling differences between Central and State mining

regulations.

Similarly, the much-needed reform in the exploration

and mining rights on the lines of hydrocarbon auction

process (Open Acreage Licensing Policy – OALP policy)

is necessary to be implemented apart from Single

Stage Auction of Mineral Block (exploration + mining)

where the investor could reserve the right to choose

the block instead of the state government. Additionally,

it is necessary to address concerns of investors such

as regulatory instability, judicial barriers to trade,

restrictions in size of lease holds for mining, and high

taxation levels that reduce the competitiveness of the

Indian mining sector.

Policy & regulation of mining should reflect

commercial responses to market signals and to address

the need for recognizing mining as an industry to

enable focused and free growth of the natural

resources sector in India. Moving beyond captive

mining as the guiding line, it is therefore necessary to

provide the right ecosystem for profitable mining to ensure

value creation.

As India today strives for “achhe din”, the era of

prosperity and well-being of all Indians can be

achieved with a robust natural resources sector in

India. This again may well be called ‘the golden period’,

yet again indicated in terms of metals and minerals

perspective.

Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.