India is rich in natural resources, with a geological makeup that is similar in many ways to that of countries such as Canada, Australia, Brazil, South Africa, Chile and Mexico. With the world’s third-largest mineral reserves, India has the potential to employ about ₹1.2 trillion (US$18.5 billion) in capital, including ₹500 billion in foreign direct investment (FDI), in the mining and minerals sector.
FDI in mining, exploration of metallic, non-metallic and permitted precious ores and related sectors including manufacturing of equipment is permitted up to 100%, subject to the Mines and Minerals (Development & Regulation) Act, 1957.
Mining is expected to generate an additional 6 million jobs in India within the next decade, shifting the scales of poverty towards empowerment and accelerating job creation by over 10% apart from saving nearly US$58 billion in foreign exchange on account of spending on imports of minerals including iron ore, coking coal and thermal coal by 2025.
The Make in India initiative simplifies the business of mining in India by holding auctions for the grant of mineral concessions (mining leases and prospecting licences) for companies interested either in mining or in raw materials for their downstream industry. In view of India’s increased need for minerals to fulfil its development initiatives towards Vision 2025, the mineral policy of India has a lot to interest those with a stake in mining globally.
India’s mission to develop 100 smart cities has commenced with a budget of about ₹1.9 trillion for 90 cities, which includes the requirements to meet the country’s steel and metals needs. As a result of this mission, steel consumption is poised to move up from 63 kilos per person to be much closer to China’s 493 kilos per person as per figures in 2016. To equip the smart cities with world class infrastructure, India needs to increase its average annual steel output by 9% between 2017 and 2021.
A multitude of startups offering technical assistance, consultancy, research and financing services have mushroomed in the minerals sector, betting on India’s thrust on power production, infrastructure development and indigenous manufacturing to raise the demand for minerals such as coal, iron ore and bauxite. Also, sector skill councils have been set up to train 500 million workers by 2022 to meet the increased need for skilled workers in the mining sector.
India’s forthcoming National Mineral Policy will seek to align the roadmap of the minerals sector with the future outlook of the country’s economy by creating a policy environment that: (a) sets out a clear mining roadmap; (b) provides for single-window clearance; (c) resolves environmental issues efficiently; (d) sets out clear guidelines for mineral funds; and (e) provides a simple mechanism for settling differences between central and state mining regulations.
The much-needed reform in exploration and mining rights is in line with the hydrocarbon auction process (open acreage licensing policy) and is expected to become a reality, apart from single-stage auction of mineral blocks (for exploration and mining), where the investor instead of the state government could reserve the right to choose the block. India will also seek to address concerns of investors such as regulatory instability, judicial barriers to trade, restrictions in size of leaseholds for mining and high taxation levels that reduce the competitiveness of the Indian mining sector.
India thus seeks to enable commercial responses to market signals and address the need for recognizing mining as an industry to enable focused and free growth of the natural resources sector. Moving beyond captive mining as the norm, India is expected to provide the right ecosystem for profitable mining to ensure value creation.
India’s push to increase the share of mining in its gross domestic product from 2.2 % in 2015 to South Africa’s 8.1% or Russia’s 7.7% is expected to increase the production of iron ore from 192 million tonnes (MT) to over 500 MT over the next decade. Apart from meeting the requirement of raw material input under the National Steel Policy, this is also expected to meet the need for domestic procurement of many minerals required for the mobile communication and renewable energy industries. India has the world’s third-largest deposits of chromium (after South Africa and Kazakhstan), which are critical to both of these industries.
The coming mineral policy reforms are also likely to bring changes to laws governing this sector, taking forward the vision with which amendments were made in 2016.
(This article was originally published in India Business Law Journal - https://www.vantageasia.com/business-perspectives-mines-minerals-regime/)