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Digging out Of the hole

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THE MINING INDUSTRY LOOKS AT BOUNCING BACK AND REBUILDING THE MARKET’S CONFIDENCE

INDIA HAS LONG BEEN RECOGNISED AS A nation well endowed in natural mineral resources and is ranked fourth amongst the mineral producer countries, behind China, United States and Russia,on the basis of volume of production. “The State of Odisha, in particular, is one of the richest mineral bearing states in India. Mining is an extremely important sector and contributes significantly to the GDP,” mentioned Prabhakar Rout, advocate, vice president (Gen), The Utkal Chamber of Commerce and Industry. However, the Indian mining industry is passing through a critical phase, especially in the last two years, witnessing negative growth. Agreeing Rout said, “In the last few years, the mining operations have suffered a great set back as the state governments have not taken interest in extension of the mining lease periods. Besides, the statutory clearances appurtenant to it are not granted as quickly as it deserves. No priority has been attached to the mining sector industries. The mines in Karna taka, Goa and Odisha are fraught with legal wrangles as the petitions filed by the aggrieved leases have not been disposed up expeditiously by the courts nor have the state governments taken any interest for speedy disposal of the pending applications and making a suitable positive approach.” He further added, “On top of it, the state/central government has appointed commissions to enquire into the irregularities committed by the mines owners, terming it as illegal mining. This has crippled the economic wings retarding the progress of socio economic developments.”

The Government should liberalise the laws and regulations in a single window system.” – Prabhakar Rout, advocate, VP (Gen), The Utkal Chamber of Commerce & Industry

Mining revenue has a vast potential in the economic growth of a nation and the respective state as well. This has been amply proved by the budget deficits of the mineral rich state, leading to negative financial growth. Yet despite India’s significant geological potential, the country does not rank very high in terms of its mineral resource base amongst similarly geological endowed nations.“THIS IS BECAUSE of three main reasons – lack of exploration, lack of mineral resource data base and regulatory inhibitions,” opined Karun Kant Dave, COO, Sesa Sterlite. “Developed countries like Canada, Australia etc. make huge investments to carry out detailed geological studies and appraisals using the most modern and scientific tools of exploration. We need to do the same.”

ENVIRONMENTAL AND REGULATORY ISSUES AND DELAYS IN GRANT OF CONCESSIONS ARE THE
MAJOR CHALLENGES TO THE INDIAN MINING INDUSTRY

India’s share in exploration is said to be less than 0.50%. As of now government agencies are allowed for exploration. Private entrepreneurs should be encouraged too. “Mineral exploration being highly risky, the government has to provide incentives for the business of exploration in forms of investor-friendly laws and tax concessions. It may be noted here that when Hindustan Zinc was disinvested, it was told it has a reserve of five years. The production has increased by ten times today and the company has resources of 40 years,” averred Dave.

Due to the above lacunae, the data bases of various mineral resources in the country too are not available or if available are very scanty. “Support to exploration agencies like GSI, MECL, NRSA, NGRI can help these agencies to strengthen their exploration base, which will bring more mineral resources to the public domain, thereby further boosting investment. The complex matrix of various mining, environment, forest, social acts and laws of the land have to be simplified for boosting confidence of investors,both national and international, in coming forward to
invest in the mining sector”, suggested Dave.

The legislations governing mines and minerals, forest and environment, pollution control mechanism and wild-life clearances are intertwined. These complex issues are to be dealt simultaneously and cohesively to achieve faster and qualitative growth.“The pity is that, these matters are administered by different ministries at the centre and departments of states resulting in lack of coordination amongst themselves and implementation at the ground.The
best answer to come out of it is formation of a single window system at both the ends,” proposed Rout.

                “The mining market is yet                   to bounce back  from the                   negative growth of 2011-13.”                  – Dillip Kumar Mohapatra ,DGM,SMS-II,                         Steel  Authority of India                                                                          

WHERE THE OTHER fields in the manufacturing are dominated by the private sector rather than public it is vice versa in the mining industry. According to Dave, in FY11, the public sector accounted for 74.5% of the total mineral production in India. “Mining companies in the world are keen on investing in India, but the government should formulate a comprehensive policy to facilitate FDI in the sector. The government (centre and state) needs to present a more transparent picture of mineral tenement information, close to a real-time basis, for potential investors. Streamlining the tax structure and ensuring transparency is also extremely important for attracting investment. The establishment of a local risk capital market in India for funding Greenfield exploration could be the key to unlock the untapped potential of the country’s vast resources,” he said.

Rout ascertained, “It is well known that the PSUs are controlled by the state/central government. The PSUs do not have full freedom to invest in this field for scientific exploitation of the resources with an aim to maximise the potential. They also suffer from public/political interventions in smooth operation of the mines. A number of suggestions have been given by the mining industry associations and experts in the field of mining and geology to do away with the distinctions to free the private and government sector.”

He also points out that reservation of mineral resources has been allowed  to the state/central PSUs and not to the private sector. Same is the case  of discriminating the allocation of the mineral properties between the  above two set-ups. The PSUs are unable to develop the mineral resources  as required of them. In addition, the private sector players do not have  an adequate resource base to either augment it or excavate and add value  to it.

“Also, many mining projects have been stalled of late due to court cases, environmental, regulatory and land acquisition issues, high borrowing costs and lack of infrastructure due to remote location of the mines,” pointed out Dillip Kumar Mohapatra, deputy general manager, SMS-II, Steel Authority of India. Interestingly, the MMDR act provides for preference to be given to the captive sources for allocation of mineral properties over the merchant minors. “It also creates a discrepancy in allocating the natural resources. This depicts the dominancy of public sector over the private operators which should not happen in a fast growing democracy for welfare of the people,” opined Rout.

Currently, most of the freely available mineral resources are located in areas that are under forest cover or in wild life sanctuaries with practically no approachability and no infrastructural facilities available. Environmental and regulatory issues and delays in grant of concessions are the major challenges to the Indian mining industry.

“A clear and transparent mineral policy, industry friendly labour and regulatory mechanism, development of infrastructure in the vicinity of mines, good connectivity (road, train and shipping facilities) and low cost of funds will help in attracting investments and development of mining in India,” suggested Mohapatra.

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