To boost Minerals sector in India: Strategy for New India @ 75

Relevance: mains: G.S paper: Indian Economy: Energy

Objectives

• Double the area explored from 10 per cent of obvious geological potential (OGP) area to 20 per cent.
• Accelerate the growth of the mining sector from 3 per cent in 2017-18 to 14 per cent, with an average growth of 8.5 per cent during 2018-23.
• Increase the job contribution (direct, associated and indirect) from the current 10 million (2 million in coal and major metals and 8 million in minor minerals) to 15 million in 2022-23.

Current Situation

India has huge mineral potential, as its prospective geology is broadly similar to that of Western Australia, especially in relation to iron ore, bauxite, coal, diamonds, and heavy minerals sand.

India has identified 5.71 lakh sq. km as the obvious geological potential (OGP) area, but only 10 per cent of it has been explored and 1.5 per cent is being mined. This is one of the reasons why India’s imports of minerals, estimated at INR 3,73,662 crore, far outstripped, more than seven times, the value of domestic production of minerals (excluding coal, atomic and fuel minerals) of INR 47,432 crore in the financial year 2016-17.

India’s share in the global production of metallic minerals, such as bauxite, chromite, iron ore and manganese ore are relatively high; India is ranked 4th to 6th among global producers. In industrial minerals, India is a large producer of zinc, aluminium and steel, ranking 5th, 5th and 3rd respectively.

Six major minerals producing states, viz., Odisha Rajasthan, Andhra Pradesh, Chhattisgarh and Karnataka, account for nearly two-thirds of the value of minerals produced in the country.

In addition to the above, India also has large potential to increase the production of minor minerals. It is estimated that their share in the value of production is about 26 per cent.

Even though minor minerals have a small share in value terms, their production is more labour intensive as compared to major minerals. Thus, they can be a source of large-scale employment generation. The sector has been affected by legalities. This has restricted the scope of mining operations and raised costs. In 2015, the government amended the Mines and Minerals (Development and Regulation) (MMDR) Act to mandate auctions for the allocation of exploration and mining rights for minerals under its purview. The results have been encouraging.

Constraints

• Shortcomings in the licensing regime such as the separation of auction of prospecting licences and provision of mining licences, and the different auction methodologies across different sectors like coal, oil and minerals.
• Heavy cost of acquiring land.
• High incidence of taxes, royalties and levies in comparison to global standards (more than 65 per cent).
• Inadequate infrastructure resulting in evacuation problems.
• Workforce productivity and skilling challenges because of the disconnect between training institutions and industry.

Way Forward

1. To facilitate participation by private sector players in exploration, launch a mission “Explore in India”, by revamping the minerals exploration and licensing policy The policy should have the following features:

• For bulk or surficial minerals, i.e., ironore, bauxite, limestone etc, the provision of “reservation” of areas for exploration by state agencies should be utilised and such areas should be allocated through the auction route after the development of reserves.
• It is desirable for public sector units (PSUs) and private sector companies to have a level-playing field with respect to mining concessions.
• An exclusive subset of rules to facilitate the exploration of rare earth minerals through private sector participation should be framed.
• Mining companies should be allowed the freedom to co-mine other minerals found in the same mining area.
• To promote this sector we need to rationalize tax structures and facilitate investment including FDI. This would help both export promotion and import substitution.

2. Single window and time-bound environment and forest clearances

• While PARIVESH has been launched on August 10, 2018 as a single window hub for environment, forest, wildlife and CRZ clearances, the Ministry of Environment and Forest (MoEF) should declare upfront inviolate forest areas. This should specify whether underground mining or open cast mining can be done or not in these areas.
• All statutory approvals should mandatorily be granted within 180 days of application for exploration and mining of minerals. Further, a provision for the issue of deemed approval letters by a competent authority should be incorporated in cases where delay beyond the specified period has occurred.
• Local forest officers may be empowered to grant permission under the FC Act, 1980 for exploration in forest areas.
• State PSUs and the private sector should also be allowed to undertake compensatory afforestation on degraded government forestland like central PSUs.

3. Boosting minor minerals through a relaxed licensing regime

• Landowners/farmers/tribals need to be given mining rights for minor minerals on their land, to enable them to mine either on their own or by outsourcing it, without auction or payment of an additional 30 per cent of the royalty to the DMF.
• If the landowner does not intend to undertake mining of minor minerals on her land, these mining leases can be allocated through the auction route.

4. Data repository, regulation and reporting

• A National Mineral Regulatory Authority, with subordinate state authorities, may be created to regulate the minerals sector to operate transparently with internationally recognized technical standards.
• A National Data Repository (NDR) of Mineral Resources should be created and uploaded online.
• Introduce a robust and transparent public reporting mechanism for exploration firms, which is compliant with the Joint Ore Resources Committee (JORC) code or an equivalent code in the statute.
• The huge mineral bearing areas reserved for state agencies that have not been utilized for more than 2 years should be de-reserved and allocated to the end user industry/ auctioned.
• Instead of field inspections, a system of self approval/self-certification with GIS based monitoring should be adopted for enforcing the provisions of the MMDR Act. This should be accompanied with a provision for heavy monetary penalties for each violation.

5. Other measures

• Immediate steps should be taken to reduce rail freight charges for all minerals that are available in India in abundance but are imported because it is currently uneconomical to transport them by rail.
• Rationalize taxation/royalty and other levies on mining, capping it at a maximum of 40 per cent of the sale value, as per global practice, to make mining competitive globally.
• Mining engineering colleges should be developed as centres for mineral exploration.
• Encourage technological upgradation by reducing import duty, initially for a period of five to ten years, on equipment/cutting edge technology to boost safety, limit environmental damage, improve productivity and increase growth.
• To enhance the resource base and ensure mineral security, India should create an organization for strategic acquisitions of mines in other countries and to sign diplomatic and trade agreements.
• Promote zero waste mining by incentivizing leaseholders to utilize and sell sub-grade minerals/rejects.
• As per the provision of Section 8A (6) of MMDR Act, 2015, the 50-year or more lease granted to 288 non-captive mines will end on March 31, 2020. To ensure smooth transition in 2020 and to avoid disruption in mineral supplies and job losses, the Ministry of Mines should complete the process of bidding for these mines one year before the date of expiry.