India's mining sector needs a strong push

There are abundant investment opportunities in India’s mining sector, for both domestic and foreign investors, but the key would be how they redefine sustainability with technology and bring in long-term changes in operations. Legacy issues that plague the mining sector need to be resolved by going to the root of each issue.

India is among the few countries that are blessed with immense mineral resources. It possesses 95 minerals — including four fuel-related, 10 metallic, 23 non-metallic, and three atomic — but is still awaiting extensive exploration of its mineral wealth for the greater economic and social good. Non-metallic minerals account for the majority of mines (792), coal and lignite for about 500, and metallic minerals for about 635.

India has not been able to utilise its mineral wealth. Government policies, legal frameworks, delays in approvals, land issues, health and safety, community unrest and sustainability have all contributed to the sluggish growth of mining in India.

Illegal mining continues, tarnishing the reputation of law-abiding and responsible miners, though the latter have continued to contribute towards the District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET), apart from paying royalty, dividend distribution tax, corporate tax, and spending 2 per cent of net profit on corporate social responsibility (CSR), as well as creating millions of jobs in remote rural and tribal areas.

In the year 2017-18, the value of India’s domestic production of all major minerals (excluding coal, lignite and minor minerals) was Rs 58,638 crore, and this increased to Rs 72,490 crore in 2018-19. But the gap between imports and the domestic production of minerals continues to widen, with the value of mineral imports touching almost Rs 4.35 trillion. The production of minerals increased from 497 million tonnes in 2014-15 to 690 million tonnes in 2018-19. 

Yet, as per the 2016 report of the International Council on Mining and Metals, Minerals and Coal Production, India’s mineral output is just 12 per cent of China’s in value terms. 

The Indian mining sector and foreign mining companies that are looking to invest in India need to be data- and technology-driven and must think digital. Robots and drones would need to become a large part of the workforce, while artificial intelligence, 3-D simulations and 3-D printing will provide the cutting edge to new-age mining. 

Digitisation of mines has been successful in developing intelligent mines in India and around the world. These mines are smart, connected, wired and analytical, and support sustainable mining.

Local communities will always play a pivotal role in the development of mining. Sustainable mining clubbed with their well-being and prosperity will be a key factor in the smooth functioning of mines. The Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) offers an excellent framework for welfare schemes to be undertaken, through the funds collected under DMF, for the development of mining-affected areas and communities.

Under the PMKKKY, at least 60 per cent of the funds are earmarked for drinking water supply, environment preservation and pollution control measures, health care, education, welfare of women and children, welfare of aged and disabled people, skill development and sanitation. The rest is to be utilised for physical infrastructure, irrigation, energy and watershed development, and for enhancing environmental quality in mining districts.

Though a large amount under DMF remains unutilised (only 24 per cent of the Rs 23,600 crore collected in 2017-18 has been utilised), it is also an opportunity to channel these funds in such a manner as to bring back the focus on growth and development of the mining sector. Of the Rs 1,500 crore collected under NMET, only 13 per cent (Rs 200 crore) has been utilised. This also offers opportunities to start extensive exploration for minerals without further delay.

Optimum utilisation of funds collected under DMF and NMET by the government, 2 per cent mandatory CSR spent by mining companies on the communities living around mining areas, focus on modern technology, digitisation of mines to improve efficiency and minimise damage to the environment, waste utilisation, safety, water conservation, and compliance with laws of the land would revolutionise India’s mining industry.

When we are aiming for a $5 trillion economy, do we have the choice of going slow on exploration and mining, knowing that, out of eight core sectors of the Indian economy, five — coal, steel, cement, electricity and fertilisers — are primarily dependent on raw material supplies from mines?

Mining companies also need to ensure that the contribution of the mineral sector in India’s GDP should increase from the current 1.53 per cent to the global benchmark of 7-7.5 per cent in countries like Australia and South Africa.

We can let minerals remain where they are, underground. But for how long? When countries like Brazil, South Africa, Australia, Canada, America and China are developing their mineral wealth to strengthen their economies, why should India remain behind?  

The writer is president, Federation of Indian Mineral Industries

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel