Mining Reforms- Will it help India realize its full potential?

In my last article, we had discussed about Zomato. In this article, we will focus on the recent changes in the Mining Laws and the impact it will have on our country going forward.

Before we discuss in detail, let us first go through some data points-

·     India is the third largest producer of coal with 729.10 million tonnes (MT) in FY20.

·     India ranks fourth in terms of iron ore production with 206.45 MT in FY 20.

·     India has 8% of the world’s iron ore deposits.

·     India became the world’s second largest crude steel producer in 2019 with production at 111.2 MT.

·     India produces 95 minerals 4 fuel-related minerals, 10 metallic minerals, 23 non-metallic minerals, 3 atomic minerals and 55 minor minerals (including building and other minerals).

·     India holds a fair advantage in production and conversion costs in steel and alumina. 

·        India’s iron and steel export in FY20 stood at US$ 9.28 billion.

·        Government introduced National Infrastructure Pipeline in 2019 with plans to invest Rs. 100 lakh crore (US$ 1.43 trillion) over the next five years.

·        The Ministry of Steel aims to increase the steel production capacity to 300 million tonnes by 2030-31 from 134.6 million tonnes in 2017-2018, indicating new opportunities in the sector.

·        Under the Mines and Minerals (Development and Regulation) Act of 1957, FDI up to 100% under the automatic route is allowed for mining and exploration of metal and non-metal ores including diamond, gold, silver and precious ores, while FDI up to 100% under the Government route is allowed in mining and mineral separation of titanium bearing minerals and their ores.

·        In June 2020, iron and steel recorded more than 100% growth in exports shipments of US$ 1.32 billion against US$ 653.52 million in June 2019.

·     India is the largest producer of sheet mica in the world and has the seventh largest bauxite reserves at around 2,908.85 MT in FY19. 

The Rajya Sabha on 22nd March 2021 cleared the Mines and Minerals (Development and Regulation) Amendment (MMRDA) Bill, 2021, which will help unshackle India's vast mining reserves that lie untapped now.

The amendments were necessitated because despite India’s immense mineral potential, the country is “under-explored” and “under-performed” in attracting investment. It is a step towards attaining mineral security of the nation. This comes against the backdrop of National Mineral Policy goals to increase mineral production by 200% in 7 years. 

India is the fourth largest reserve of coal, still we import coal. According to an assessment by the Geological Survey of India, we have around 500 million tonnes of gold but still we import 983 tonnes of gold every year, which is worth around Rs 229 lakh crore.

Brief highlights of the amendments: -

·        do away with the distinction between the captive and non-captive mines.

·        allow captive mines (except those mining atomic minerals) to sell up to 50% of the minerals excavated during the current year and will also help towards the auctioning of more mines.

·        allow the union government conduct auctions for those blocks wherein the “state governments face challenges in conducting auction or fail to conduct it," with the revenues accruing form such blocks going to the state government’ exchequer. This will help curb favoritism by some state govt to specific miners.

·        all clearance and licenses granted shall continue till the reserves have been mined and post the expiry or termination of the lease, will be transferred to the next successful bidder. Earlier it was just for 2 years after which the lessee had to obtain fresh clearances all over again. This was a time-consuming process. The amended bill provides for seamless transfer of statutory clearances from one lessee to another, with the provision that such clearances remain valid throughout the duration of the lease.

·        the bill will also allow private entities to be engaged in mineral exploration work.

·        The old law gave the central government the power to reserve any mine (except coal, lignite and atomic mineral) for a specified end use. These were called captive mines. The Centre could decide where production from such mines would be used. The new bill has removed all such restrictions.

·        The amended bill mandates that once a mining lease has been given, production has to start within the next two years, otherwise the lease gets terminated.

·        It also provides for extending the mining lease given to government companies after the lease expires. This was not allowed earlier. This provision will go a long way in helping government public sector undertakings.

·        So far, if a company was given an exploration license and managed to find minerals, it had to apply afresh for getting a license for production from the mine. This clause has been removed now. The new bill allows seamless transition from exploration to production.

This assumes significance given that the mineral sector contributes only 1.75% to the country’s gross domestic product (GDP), with India importing minerals worth ₹2.5 trillion annually. The contribution of mining in Australia and South Africa is at 7% of their GDP.

Hence stage is set for big things to happen after these big-bang reforms in the mining sector. The reforms will pave the way for auctioning of at least 500 mineral blocks. It is going to bring into play a large number of mining blocks so the production in most of the minerals resources will see quantum jump because of these mines which will become available for interested parties now. It will also generate huge employment opportunities.

As many as 14 coal blocks from Odisha are set to go under the hammer with the Centre on Thursday launching its second tranche of auction of 67 coal blocks for commercial mining.

The move also aims to end the monopoly of the Coal India Limited (CIL).

Commercial coal mining allows anyone, including the foreign players, to bid for coal blocks, explore coal and sell it in the open market as the concept of end-use has been scrapped.

Now let us have a look at the companies which are going to grow further due to this. Each of the below companies already have had a good run of late but considering the value of untapped potential of mining our country has and the investment planned by these companies, they can reach newer heights -

NMDC, Hindalco, Adani Enterprises, JSW Steel, Tata Steel, Coal India ( they will become competitive and with some favor from the govt ), NALCO, Kamdhenu Ltd, Hindustan Zinc, Hindustan Copper, Ashapura Mines, Mishra Dhatu Nigam, MOIL ( market share of 50%, it is the largest producer of manganese ore in India- having a genuine MOAT), Orissa Minerals, Shiva cement-a subsidiary of JSW Cement Ltd- its clinker unit project in Orisssa’s Sundergarh district should help it grow.

In my next article, I will try to throw some light on a different sector. Till then have a great week ahead and a Very Happy Holi to all.