Compiled by the Confederation of Indian Industry (CII), a study report aptly titled ‘Towards a Globally Competitive Minerals & Mining Industry’ launched at Mining Summit 2019 in New Delhi recently advances a set of timely recommendations to bring about long-overdue reforms in the mining sector in India. The proposals address certain crucial issues such as lack of incentives for widespread exploration of mineral resources in the country and a cumbersome regulatory process that stymies the growth potential of the sector.
Addressing the summit, Upendra Joshi, Joint Secretary, Ministry of Mines, said: “The minerals and mining industry is core to India’s growth ambition of a USD 5 trillion economy. Exploration, extraction and management of minerals have to be guided by national goals and perspectives, to be integrated into the overall strategy of the country’s economic development and at the same time, there should be effort to promote domestic industry and reduce import dependency.”

“Exploration can improve India’s mineral security and competitive edge. There is significant scope for new mining capacities in iron ore, bauxite and coal and considerable opportunities for future discoveries of sub- surface deposits. The Geological Survey of India has almost doubled its exploration activity by implementing about 400 mineral exploration projects on various mineral commodities. Attractive provisions have been made for inviting private investment in mineral exploration through revenue sharing model,” Joshi added.

Speaking on the occasion, Sunil Duggal, Chairman, CII National Committee on Mining and CEO, Hindustan Zinc Ltd spoke about the maximum multiplier effect the mining industry has on the country’s economy, which is 13 times that of agriculture and six times that of manufacturing. “In terms of GDP contribution, mining has a multiplier effect like every 1% increase in the growth rate of mining leads to an increase of 1.2-1.4% in the growth rate of industrial production.”

CII Mining Summit 2019

The report notes that the negative perceptions surrounding mining activities, such as mining causes environmental damage and is responsible for displacing local communities, need to be dispelled first. India is endowed with vast resources across a range of fuel, metallic, non-metallic and atomic minerals. However, the mining sector’s contribution to the GDP is only 2.6%, down from 3% in 2011-12. In developed economies such as Australia and Canada, the mining sector accounts for around 7.8% of GDP.

The Proposals at a Glance

The study report claims that energizing the minerals and mining industry would require incentivizing exploration and streamlining the auctions process. The report highlights some critical areas including enhancing efficiency and speed of clearances andreducing royalty rates to match international benchmarks that need to be addressed at the earliest.

Incentivising Exploration

Exploration is an expensive and high-risk proposition/venture, with extremely low success rates for non-bulk minerals. Currently, there is no seamless licensing regime from exploration to mining. This renders the value of an exploration licence totally uncertain, the study notes. The key intervention to address this issue is introducing seamless transition from exploration to mining license. It also suggests that permission be accorded for permit sale of licence at any stage, at the sole discretion of the concessionaire. In case of a licence sale, the government must have the right to match the price accepted by the concessionaire, within a prescribed time limit. This move is likely to encourage the emergence of junior explorers.

Allowing private companies to proactively approach the government for areas which the government has not yet formally offered for exploration is another recommendation advanced by CII. If the government, on evaluation of the block, deems the block suitable for exploration, it initiates the process of inviting proposals for award of a seamless licence for the block. The report puts forth the proposal that the government should direct the Securities and Exchange Board of India (SEBI) to examine providing special dispensation for prospecting companies.

Tweaking Regulatory Norms

As the small size of mines in India has an adverse impact on the commercial viability of the mine and is unlikely to attract international capital, it is vital to ensure that mining leases are of at least optimal size to enable commercially viable scientific mining and the use of state-of-the-art technology.

It is also important that the government permits acquisition (or lease) of land adjoining the mine for associated non-mining activities and adopts a cluster approach for small deposits which, when aggregated, may be viable.

Processes and clearances are seen as major impediments to the development of the sector: they are currently tedious and subject to huge time delays. The report recommends that the states should be mandated to obtain in-principle clearance from the forest department prior to offering a block for a concession.

The government should also declare upfront all applicable restrictions on the block in the bid documents. It is crucial to develop a database of forest areas in mining regions; segregate the forest areas into ‘low density’, ‘medium density’ and ‘high density’ so that the time taken for obtaining clearance is related to the forest type. Adopting a ‘deemed approval’ approach for ‘low density’ forests could also be considered.

“Permit lease of land for mining, as an alternative to outright purchase, with the proviso that the leased land will be returned to the owner after reclamation, with an attempt to restore it for broadly similar land use, as was earlier. The lease rental must be such as to make the land holder better off by parting with the land on lease instead of continuing to hold,” the study recommends.

Revising Royalty Rates

Mining companies in India are subject to much higher financial levies than other mining geographies, as a result of high royalty rates, multiplicity of levies and double taxation. It is vital to reduce royalty rates in line with international benchmarks and eliminate additional state mining taxes and levies.

The study suggests that the government should create a digital, updated and credible national inventory of mineral resources. ”Create a digital online mineral atlas (similar to the Mining Tenement System), showing mineral titles on a spatial map; later, to also indicate inviolate areas for mining,” it says.

Embracing Technology

Industry players should collaboratively develop specific norms for sustainable mining (building on the Sustainable Development Framework initiated by the Indian Bureau of Mines), which companies should voluntarily and proactively adopt, the study suggests. The mining industry should institute a mechanism to share sustainability best practices and offer to enforce the same voluntarily.

CII Mining Summit 2019

The government must take cognizance of the emerging global trends in mining while reviewing the mining policy. “India must be prepared for the emergence of the ‘smart mine’ powered by advanced mining technologies, robotics, big data, and digital technologies such as artificial intelligence. A consequence of the ‘smart mine’ will be the changing nature of the mining workforce in terms of gender mix and role composition. Deep sea mining will take on increasing importance, as countries attempt to secure high-grade and precious minerals,” the report observes.