Commerce Dashboard

IBEF Blog

INDIA ADDA – PERSPECTIVES ON INDIA

Economy

Go Back

Mining sector reforms and the road ahead

IBEF, Knowledge Centre

Jan 13, 2022 10:31

Introduction

India is rich in natural resources, notably minerals, making the mining industry extremely valuable. The mining industry is heavily regulated, and the legal framework has changed significantly in the last five years, resulting in a more transparent and efficient system. India produces 95 minerals, including 4 fuel-related minerals, 10 metallic minerals, 23 non-metallic minerals, 3 atomic minerals and 55 minor minerals. India is one of the world's top producers of valuable minerals like chromite, iron ore, coal, and bauxite. Rajasthan is the highest contributor to minerals production in India, followed by Odisha. The mining acts and rules are being amended to ensure ease of doing business in this industry.

Source: Ministry of Mines- Annual report

Economic contributions (GDP, exports)

India's mining sector is one of the country's most important industries, and many industries rely on it for essential raw resources. The GVA for the Mining and Quarrying sector was reported at around US$ 54 billion for FY19. India is the world's second-largest coal producer and has the world's fifth-largest coal reserves. The cumulative growth rate from April to October 2020-21 is 11.4% higher than the corresponding period in the previous year. The Government has also supported the mining sector with the budgetary allocation to the Ministry of Mines of around US$ 117.6 million for FY20. India relies on imports more than it exports for the mining industry; however, exports have remained stable over the years. Exports in the mining sector stood at US$ 24.66 billion for FY 20.

Source: Ministry of Mines- Annual report

Key Growth Drivers

Factors that led to the growth of the mining sector in India are as follow:

  • Improved infrastructural development and automobile manufacture.
  • The growth of the power and cement sector.
  • Inclusion of the private sector in the mining industry has played a dominant role in increasing mineral production accounting for 67.33% of the total value.
  • Since the Government took the initiative for policy reforms, there has been a noticeable shift in the mining industry, like relaxing mineral exploration norms.
  • The Mines and Minerals Amendment Bill, 2021, has introduced various reforms and developments in the mining sector

Recent Developments

India presents a major opportunity in terms of investment in the mining sector. Some of the recent trends are as follow:

  • The National Mineral Exploration Trust (NMET) has approved 187 exploration projects with a total cost of Rs.895.72 crores (US$116.4 million), out of which 69 projects have already been finished, while 118 are still in the works.
  • The Government of India intends to use the coal loading system at Paradip Port to boost coal transportation via the sea route and turn it into a coal hub.
  • The Ministry of Mines has formed a Joint Venture company, Khanij Bidesh India Ltd (KABIL), with National Aluminium Company Ltd (NALCO), Hindustan Copper Ltd (HCL), and Mineral Exploration Corporation Ltd (MECL) as partners to ensure the nation's mineral security and achieve self-reliance in critical and strategic minerals.
  • The development of 23 project works with a total length of 600.13 km under the CRIF plan in Madhya Pradesh has been approved with a budget outlay of Rs. 1,815 crores (US$ 236 million) for FY22.

Major government reforms & environmental considerations 

India's central government and state governments are jointly responsible for the mining sector's administration. The industry is governed by a federal system that divides regulatory authorities and responsibilities between the central government and the respective state governments. The Mines and Minerals (Development and Regulation) Act 1957 (MMDR Act) was enacted by the Indian government as the primary legislation governing the mineral sector (other than petroleum and natural gas). Besides MMDR Act, the following rules and regulations establish the legal foundation for the mining industry:

  • Mineral Concession Rules 1960 (MC Rules):  These rules lay the foundation for granting concessions, rejecting applications, keeping accounts, and submitting reports to state governments.
  • Mineral Conservation and Development Regulations (Mineral Conservation and Development Regulations):  These regulations set the standards to be met to ensure that mining is done in a scientifically sound manner while also protecting the environment.
  • Mineral (Auction) Rules 2015 (Auction Rules): These rules lay the foundation for granting significant mineral concessions through an online electronic auction.
  • Mines Act:   This Act establishes rules for mine worker safety and working conditions and provisions for mine administration and operation.
  • Offshore Areas Mineral Concession Rules 2006 (OAMDR Rules): The process for granting and renewing mineral resource concessions in offshore areas is outlined in these guidelines.

The MMDR Act gives the central Government the authority to issue directives to state governments to ensure sustainable mineral development and reduction in the exploitation of air, ground, water, and noise. The following are some of the most important steps taken by the Government to protect environmental impacts of mining:

  • Clearance under the Environment Protection Act 1986 and the Environment Protection Rules 1986, as amended from time to time, is in line with the Environment Impact Assessment Notification 2006.
  • Clearance from the applicable State Pollution Control Board in accordance with the following:
  • Water Act 1974.
  • Air Act 1981.
  • Hazardous and Other Wastes Rules 2016.
  • Solid Waste Management Rule 2016.
  • Noise Pollution Rules 2000.
  • Construction and Demolition Waste Management Rules 2016.
  • Ozone Depleting Substances Rules 2000.

Road Ahead  

India has immense mineral potential, with mining licenses provided for a 50-year period that is both long and reliable. The strategic location of India allows convenience in exporting, and over the next 15 years, demand for certain metals and minerals are expected to rise significantly. The Government plans to introduce more mining reforms soon to promote the most efficient use of the country's natural resources. The implementation of the National Mineral Policy in 2019 presents a significant investment opportunity in India. Due to reforms such as the Make in India Campaign, Smart Cities, Rural Electrification, and a focus on building renewable energy projects under the National Electricity Policy, as well as increased infrastructure development, India's mining sector is expected to undergo significant changes in the coming years.

 

POST COMMENT