Sector Survey: Mining

Listicle edited by contentmii on Sat, 02/08/2020 - 19:18

Mining is a major economic activity in India and the industry is the backbone of the manufacturing and infrastructure sectors of the economy. It provides basic raw materials to several significant industries, including thermal, iron and steel, petroleum and natural gas, electrical and electronics equipment, among others. Indeed, the country is well-endowed in minerals The sector contributed about 2.6% of GDP in 2015-16, with barely 20% of reserves mined; India presents a major opportunity for investors. In the last two years, production of minerals witnessed a spike of 5% – from USD 68 Billion in FY 2012-14 to USD 72 Billion in FY 2014-16.

Robust development in the mining sector is fuelled by sustained growth in the automotive and infrastructure sectors. In turn this leads to a higher demand for power and steel in the country. With an average production of 24 million vehicles annually, India’s automotive sector is one of the largest in the world.2 Infrastructure projects in the country play a significant role in providing attractive business opportunities for steel, zinc and aluminum producers. India’s construction sector is the second largest contributor to India’s economy and accounts for the second-highest inflow of FDI after services. Additionally, minerals like manganese, lead, copper, and alumina are estimated to witness double-digit growth in the coming years.3 A closer look at the infrastructure build-out in the country reveals multiple opportunities for growth in the mining sector:

  • Higher public spending on infrastructure and transportation, particularly on rail, roads, and ports is a government priority
  • Spending on railways is expected to double to over USD 15 Billion a year4
  • City metro systems are being built across India, with over 10 projects underway or planned
  • India is set to double its port capacity over the next decade, with as many as six new mega ports planned5
  • Highway construction in 2016-17 was 22 km per day and is targeted to reach 40 km a day in 2017-186
  • There is a trend of rapid urbanisation with 100 Smart Cities planned by 2020
  • About 80 to 100 metric tons of cement per annum is expected to be added over the next five years7
  • Economic growth and modernisation driving the energy demand, particularly coal: Energy demand over the next 25 years is estimated to grow at 4% per annum8

Quite clearly, the demand side potential is all set to grow. India is still at an early stage on the mineral consumption curve which implies that as the GDP of the country increases, its mineral consumption would grow at a rapid pace in line with the growth witnessed in other emerging markets like China and Brazil. In 2016, India’s coal output rose by 5.1% and it’s estimated that the coal demand in India will see an annual growth of 5% by 2021, the biggest growth ever. India is also being considered as a “new catalyst” for iron-ore demand with the government’s decision to triple spending on public infrastructure9. India holds a fair advantage in terms of cost of production, especially in the case of conversion costs in steel and aluminum and cheap labour. Adding to this, the country’s strategic location also accelerates the demand for exports to developed as well as fast-developing nations. The country is well-endowed in minerals, with striking similarity to mineral-rich regions like Antarctica, Australia, South America and South Africa. However, India is yet to be completely explored and this is exactly where the opportunity lies.

The Government is focused on accelerating mineral exploration activity in the country through the National Mineral Exploration Policy (NMEP). The policy aims at making available geoscientific data of world standards in the public domain. The NMEP envisages involvement of the private sector in carrying out quality research in the area of mineral exploration, while aiming for the creation of a dedicated geoscience database.10

The Mines and Mineral Development and Regulation Act (MMDR) was amended in 2015 and then in 2016 to make the process of allocation of mineral blocks more transparent and competitive through auction. The amendments also allows mergers and acquisitions of companies and facilitates ease of doing business to improve profitability and decrease costs of the companies dependent on supply of mineral ore from captive leases. Until November 2016, 17 mineral blocks across seven states have been auctioned. This has led to generation of additional revenue to the tune of USD 7 Billion.11

Under this Act, a National Mineral Exploration Trust has also been established to encourage exploration activities and also keep a check on illegal mining. Until May 2016, there has been a deposit of at least USD 30 Million and 13 mineral exploration projects have been approved.12

The Government of India has also undertaken several other measures to promote the growth and development of this sector. To mitigate the adverse impact of mining on the environment, health and people living in mining districts, the Government has launched the Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY). Primary objective of PMKKKY is to implement a range of welfare projects in mining areas. Under the scheme, at least 60% of the funds are proposed to be utilised for meeting basic needs like drinking water supply, health care, sanitation and skill development. The remaining funds are used for infrastructural needs, such as construction of roads and railways.13

Mining practices require skilled and reliable manpower. To address this challenge, the government has set up a Skill Council for Mining Sector to train 450,000 people in the mining sector to help them with employment in the next ten years.14

With the Government’s consistent efforts in the promotion and development of the sector as well as the untapped potential the industry offers, the mining sector is poised to make significant strides and reach its pinnacle in the years to come.

Source: targets-laying- over-40- km-of- roads-every- day-in- 2016-17/articleshow/51907323.cms

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