Forging Ahead

Forging Ahead

After years in the wilderness, the Indian mining industry is on the cusp of a turnaround, largely aided by focused reform measures from the government.

India´s mining industry is growing by leaps and bounds. According to government data, in the year 2015-16, the country´s mining sector output recorded a growth of 9 per cent. This is a remarkable achievement, considering the three steady years of contraction since 2011-12.

The government has been going ahead with its big-bang mines auction process. Despite a tepid start to the first phase of the process, the auction proceedings are now gathering pace. Under the next phase of auctions, mines containing minerals like gold, diamond and iron ore will come under the hammer. During the first phase, auctions were conducted for seven mines.

According to reports, various state governments are expected to receive a combined revenue of around Rs 42,892 crore from the auction of 12 non-coal blocks over the next 50 years. Karnataka, Rajasthan, Andhra Pradesh, Odisha, Chhattisgarh and Jharkhand will earn Rs 36,654 crore revenue in addition to Rs 6,238 crore royalty and funds over the 50-year estimated life of these mines.

Largest limestone auction
In September, the country´s largest limestone block was successfully auctioned. The block at Nagaur (Rajasthan) received a bid that was eight times the reserve price. The block is estimated to hold 168 million tonnes of high-grade limestone reserves. Three major cement industry players (Emami Cements, JSW Cements and Mangalam Cements) took part in the e-auctions.

With a reserve price of Rs 35 per tonne, Emami Cements walked away with the block with a final bid of around Rs 300 per tonne, more than eight times the reserve price. Rajasthan is expected to receive around Rs 6,000 crore in revenues over the life of the mine.

Government focus
There has been a qualitative change in the approach of the Centre towards the mining sector. The process of comprehensive reform began with the restoration of coal allocation policies by the government, followed by a radical overhaul in the allocation policies and procedures for other major mineral blocks. Among other initiatives, the government has made significant efforts to accelerate the growth of the mining industry through speedy clearances, transparent auctions and creating an exploration fund.

The output of the mining sector had fallen sharply in the year 2014-15. This poor performance was due to various reasons - the closing down of several mines due to court orders, non-renewal of expired mining leases, etc. The government took remedial measures through the Mines and Minerals (Development and Regulation) Amendment Act, 2015, including the insertion of transition provisions for extension of existing leases to obviate disruptions in supply of ore and to ensure regular supply of raw material to the industry; Various other changes have also been brought about - like the portal that was recently launched for star ratings of major mineral mines. (See box)

Status report
Minister of State for Power, Coal, New & Renewable Energy and Mines Piyush Goyal has said that that as of August, seven mineral blocks have been auctioned in the country. Out of this, six blocks were auctioned during the year 2015-16, with estimated additional revenue to the respective state governments of Rs 13,032 crore during the lease period of the mines. One block has been auctioned in 2016-17, with estimated additional revenue of Rs 106 crore during the lease period. According to reports, various state governments have indicated a pipeline of 80 blocks which could be considered for auctioning. These auctions would depend on the status of the preparedness in terms of completion of prescribed level of exploration and preparation of geological reports and establishment of mineral contents as per the Minerals (Evidence of Mineral Contents) Rules, 2015.

The game-changer
In what was probably the most important reform in the sector, the Cabinet approved the National Mineral Exploration Policy (NMEP) in August. The NMEP has been fashioned to ensure the increased participation of the private sector in mining activities. The Centre´s focus is to ensure that there is a comprehensive approach towards mining to uncover India´s full mineral potential.

Of course, there are still many areas in the Indian mining sector that are crying out for reform - like the need to increase the adoption of the latest global technologies and greater utilisation of efficiencies, adoption of clean extraction methods, and strengthening of safety regulations. Despite negative global headwinds, industry observers are bullish on the domestic mining sector, and on the reforms front, the government seems to be in it for the long haul.

Star Ratings
The Mines Ministry, through the Indian Bureau of Mines, has developed a template for a scheme of star rating of mines. The main objective of this system is to bring all mines to a minimum standard of star ratings in the shortest possible timeframe, to adopt sustainable practices. The main advantages of the star rating of mines will be:

  • Comprehensive mitigation of environmental impacts from mining activities on land, air and water;
  • Collation of various technical, environmental and social data of the mining sector at one platform by IBM, which would be utilised to enable better management and monitoring of the compliance of various conditions laid down by the statutory authorities for mining;
  • Addressing of cumulative impacts in mining areas through coordinated and collective action in the long run by helping in formulation of +ªComprehensive Regional Plans-¦- a robust environment & social management framework;
  • Availability of the information on mining as well as the conservation activities in the public domain, to enable greater transparency and enable effective participation of stakeholders and speedy resolution of conflicts;
  • Reduced delays in obtaining various clearances (environmental, forest, mining plans, etc.), for mines. The government will allow self-certification for the various approvals for needed for mining projects;
  • Monitoring of progressive and final mine closures to ensure that the lessee leaves the area after proper management of any adverse impact over the mined area.
  • Encouraging the adoption of highest standards and sharing of good practices in the mining sector.

Digging Deep
The National Mineral Exploration Policy (NMEP) aims to meet the following primary objectives:

  • The Ministry of Mines will carry out auctioning of identified exploration blocks for exploration by the private sector on revenue sharing basis in case their exploration leads to auctionable resources. The revenue will be borne by the successful bidder of those auctionable blocks;
  • If the explorer agencies do not discover any auctionable resources, their exploration expenditure will be reimbursed on normative cost basis;
  • The Centre will create baseline geo-scientific data as a public good for open dissemination, free of charge;
  • The government will also create provisions for inviting private investment in exploration through attractive revenue sharing models.

(Source: Government of India statistics)

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