Indian Mining Comes of Age
Indian Mining Comes of Age

Indian Mining Comes of Age

It has been said that value can only be created from the Earth´s crust or from human intellect, and that most of the times, these two elements come together to create products that we need. This is an interesting way of looking at things, and it is very difficult to argue with the wide sweep of this statement. The question that follows immediately is who´s winning, who is contributing more - the Earth or the brain. Numbers tell a fascinating story here - clearly, technology companies like Apple or Google have overtaken mineral companies like Exxon-Mobile or Shell, in the last decade, in terms of market capitalisation, which is adequately accepted as a measure of value creation. It is evident that grey matter is winning over the earthly minerals. But minerals remain important and essential, even if the sector has been pushed around a little by technology, and has been asked to play second fiddle these days. And by natural progression, mining also retains its position as the starting point of all manufactured products. Things like petroleum, iron ore, bauxite, coal, and limestone are extracted from the Earth´s crust and processed further for use by us in one form or another - the downstream products produced from these minerals are absolutely indispensable items like petrol, steel, cement, aluminium, and electricity.

In India, the mining sector remained in an inefficient and sub-optimal state, mostly because it was made to operate in imperfect market conditions. Allocation of mining concessions were opaque, institutions and regulations governing mining were irrational, policies for awarding prospecting licences were not reflective of the inherent risks, near monopoly situations were allowed to prevail in minerals like petroleum and coal, and even pricing of mined/processed products was artificially administered in most cases. In short, the whole sector was a beehive of cronies, and integrity, transparency, and competitive spirit were absent. The principle was to make hay while the sun shines. All this was exactly the opposite of what the doctor would have prescribed for the sector to thrive, grow and become competitive.

But things are changing now, and changing for the better. Pushed by the Supreme Court, governments have started allocation of mines by auctions only. Coal mines are being auctioned to private users for captive use, and the day is not far when coal mines for commercial sale will also be auctioned to private parties. The Mining Act has been revamped, and the processes for environmental clearances have been also reviewed. So, indications are, that on one hand, the age-old monopolies are being questioned, and on the other, the principle of public good and public ownership of natural resources is being recognised. These are massive changes, with huge implications for the people of our country. With all these improvements, we can surely say that mining in India is coming of age.

Whenever such drastic changes happen, we have to be sensitive to being equitable to all groups of stakeholders. Care has to be taken to build provisions in the emerging policies to make sure that we do not create new entry barriers in sectors like power, steel, cement, and non-ferrous metals. If a new entrant has to now pay a hefty premium for every tonne of his raw material while his existing and entrenched competitor gets it free for the next 20 or 30 years, then a level playing field does not exist, and new entrants will not find it sensible to enter these businesses. Ultimately, the consumer at the end of the value chain, the citizens of the country, will continue to get a raw deal. This cannot be the desired end-result of a policy revamp, and will require to be revisited.

Even as the Indian mining industry awakens to its full potential, attracts foreign investments, and gears up to efficiently to exploit our rich natural resources embedded in our Mother Earth, the global mining industry also may yet see a revival, riding on a few naturally occurring sunrise commodities like lithium, silicon dioxide, helium, and rare metals. Watch out, technology giants of today, the miners are coming!

Sumit Banerjee
Chairman, Editorial Advisory Board

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