Indian mining policy overhaul seeks to stimulate sector
miningweekly.com
By: Keith Campbell
Published on 14th November 2008
JOHANNESBURG (miningweekly.com) - India is seeking to encourage foreign private-sector involvement in its mining sector, including by junior exploration companies.
“A major part of our mineral wealth has not been properly prospected,” reports Indian Ministry of Mines secretary Shantanu Consul.
“That is the challenge facing us – how to bring more of our mineral resources into play, through better reconnaissance.” Although 98% of India’s land surface has been covered by first-generation geological maps, to scales of either 1:63 360 (that is, one inch equals one mile) or 1:50 000 (one centimetre equals 500 m), reportedly only 50% has been explored for minerals and only 4% has so far been subject to geochemical mapping (although this last programme is being targeted on promising areas).
India’s mineral and metal exports for the financial year (FY) 2006/7, which starts on April 1, amounted to nearly $2,9-billion, up 8,2% from the FY 2005/6 figure of almost $2,7-billion. The country already ranks first in the production of mica blocks and splittings, third in the production of chromite, third in the production of coal, lignite and barytes, fourth in iron-ore (India ranks eleventh in the production of crude steel), sixth in bauxite, sixth in the production of manganese ore, and tenth in the production of aluminium. “Unfortunately, the quality of our coal is not the best, so we have to import coking coal,” he avers.
In all, the country produces 89 minerals and metals, of which four are fuel minerals, eleven are metals, 52 are nonmetallic, and 22 are ‘minor minerals’ (such as building stones, gravel, clays and ordinary sand). These include cobalt, copper, diamonds, gold, graphite, gypsum, ilmenite, lead, mercury, nickel, petroleum, rare earths, silimanite, sulphur, uranium and zinc.
NEW MINERALS POLICY
Foreign direct investment in the Indian mining sector in the period 2000 to 2008 was $510-million.
“This is a drop in the ocean, by Indian standards,” affirms Consul. As a result, this year the Indian government adopted a new National Minerals Policy for nonfuel and non- coal minerals. Full foreign ownership is permitted with regard to nonfuel, noncoal minerals and metals.
Some parts of the new policy will require amendments to the 1957 Mines and Minerals (Development and Regulation) Act (MMDR Act), the 1960 Mineral Concession Rules, and the 1988 Mineral Conservation and Development Rules. The amendments to the MMDR Act will have to be passed by the Indian Parliament. “We hope that these amendments will be passed during the first half of next year.” Those parts of the new policy that require these amendments will be held in abeyance until Parliament amends the Act. “Those that don’t, we’ll implement immediately.
“A major objective of this new policy is to encourage reconnaissance and prospecting, and to attract juniors,” explains Consul. “It introduces seamless transfer from reconnaissance to prospecting. Once the Act is amended, a company with a reconnaissance licence will automatically get a prospecting permit.” The new policy is also expected to give greater assurance to mining majors, who are present in India but not as active as they are in other emerging countries and regions.
Previously, a company with a reconnaissance licence – the first step to developing a mining project in India – had no assurance that it would be able to secure the necessary follow-up, a prospecting permit. Thus, expenditure on reconnaissance could be entirely wasted, and might actually benefit another company, which had not invested in reconnaissance at all. (The third step in developing a mining project in India is the securing of a mining licence.)
One key change in policy – and one of those that will require a change in the Act – will substantially increase the area covered by a reconnaissance permit, to 5 000 km2, which will make aerial geophysical surveying viable. Previously, the area covered by a reconnaissance permit was too small to make such modern methods cost effective. “As yet, there is no competitive bidding for reconnaissance permits. Basically, it is first come, first served,” he says. “But this is changing.”
It is important to point out that the new policy also puts great stress on sustainable development and the protection of the environment. “No mining lease would be granted to any party, private or public, without a proper mining plan including the environmental management plan approved and enforced by statutory authorities,” states the 2008 National Minerals Policy. This plan should properly provide for the control of damage to the environment, the restoration of the mined areas, and for the planting of trees in accordance with prescribed norms. “As far as possible, reclamation and afforestation will proceed concurrently with mineral extraction.
“This will be a major challenge for us,” admits Consul. “Indian courts are very conscious of the need to enforce environmental laws. There are also environmental nongovernmental organisations and lobbies, and the people themselves. We must exploit our mineral wealth while protecting our environment, and persuading mining companies to restore their sites to pristine condition once mining is finished. A number of mining companies already recognise this.”
The new minerals policy also seeks to promote the conservation of the country’s mineral resources. “Conservation of minerals shall be construed not in the restrictive sense of abstinence from consumption or preservation for use in the distant future but as a positive concept leading to augmentation of reserve base through improvement in mining methods, beneficiation and utilisation of low-grade ore and rejects and recovery of associated minerals,” it states.
“There shall be an adequate and effective legal and institutional framework mandating zero- waste mining as the ultimate goal and a commitment to prevent suboptimal and unscientific mining. Nonadherence to the mining plan based on these parameters will carry repercussions.”
Beneficiation is also important: “Mineral sectoral value addition through latest techniques of beneficiation, calibration, blending, sizing, concentration, pelletisation, purification and general customisation of product will be encouraged . . . . Attention will be given to beneficiation . . . . There shall be cooperation between and coordination among all organisations in the public and private sectors engaged in this task.”
Currently, the mining sector in India directly and indirectly employs some 2,5-million people. “We are suffering from a skills shortage in mining,” admits Consul. “But gone are the days in which the government was the sole source of mining education and training. Now, private-sector education and training is important. And it’s a matter of supply and demand. As demand from mining is increasing, we expect the private educational sector to create courses for mining to provide the supply. We are encouraging this.”
THE INDIAN SYSTEM
India is a federal Parliamentary Republic, composed of 28 states and seven territories. In the words of the new minerals policy, “India is a federal structure with a single economic space.”
In terms of the Constitution, mineral rights are vested in the states, not the central (federal) government. However, regulation of the mining and minerals sector, except for minor minerals, is undertaken by the central government. (Regulation of the mining and processing of minor minerals is done by the various state governments.) “The states are very important,” explains Consul. “Royalties accrue to them. The new policy increases the authority of the state governments, especially with regard to reconnaissance permits.”
Moreover, although there is only one MMDR Act, its administration is divided between two Ministries – the Ministry of Mines, and the Ministry of Coal. The Ministry of Mines is responsible for the survey and exploration of all minerals except atomic minerals, natural gas, and petroleum; for the mining and metallurgy of nonferrous metals such as bauxite/ aluminium, copper, gold, lead, nickel and zinc; and for the administration of the MMDR Act, except with regard to coal, natural gas and petroleum.
Subordinated to the Ministry of Mines are the Geological Survey of India (GSI) and the Indian Bureau of Mines. The GSI was founded in March 1851 and is one of the oldest geological surveys in the world. Possessing modern laboratories and a wide breadth and depth of expertise, it currently has a complement of 2 100 geoscientists and technical professionals and has offices in every state in the country.
The Indian Bureau of Mines promotes the scientific development of the country’s mineral resources, as well as the conservation of minerals, and the protection of the environment in mines, except for atomic minerals, coal, minor minerals, natural gas and petroleum. The bureau also regulates the industry by enforcing the relevant laws and regulations, including the 1986 Environmental Protection Act, and carries out scientific, technological-economic research into mining, geological studies, ore beneficiation and the environment.
Also under the Ministry of Mines, and classified as autonomous agencies, are three research institutions. These are the Jawaharlal Nehru Aluminium Research, Development and Design Centre, the National Institute of Rock Mechanics, and the National Institute of Miners’ Health.
The Ministry is also responsible for four State-owned companies – public-sector undertakings (PSUs) in Indian terminology. These are the National Aluminium Company (Nalco), Hindustan Copper Ltd (HCL), and the Mineral Exploration Company Ltd (MECL). A fourth PSU, Bharat Gold Mines, has been closed and is in the process of being formally wound up.
In addition, the Ministry has minority shareholdings in two previously State-owned, but now privatised, companies. These are the Bharat Aluminium Company, in which the government has a 49% holding, and Hindustan Zinc, which is 29,54% owned by the Ministry.
The Ministry of Coal has overall responsibility for the determination of policies and strategies regarding the exploration and development of the country’s coal and lignite reserves. It administers the 1974 Coal Mines (Conservation and Development) Act, the 1957 Coal Bearing Areas (Acquisition and Development) Act, as well as Acts and agencies covering the welfare and pensions of coal-miners.
It is also responsible for all matters concerning the production, supply, distribution and price of coal, as well as the development and operation of coal washeries, excepting those which are the responsibility of the Department of Steel.
Commercial coal-mining started in India in 1774, but the sector has, in recent decades, been a government-owned monopoly. This is changing, with private-sector companies now able to bid for coal blocks to mine, to supply nonpower sectors with the energy mineral.
Even so, the Ministry of Coal still oversees two PSUs – Coal India Ltd (CIL), which has eight subsidiaries, and the Neyveli Lignite Corporation. CIL’s sub- sidiaries are Bharat Coking Coal, Central Coalfields, Eastern Coalfields, Western Coalfields, South Eastern Coalfields, Northern Coalfields, Mahanadi Coalfields, and the Central Mine Planning and Design Institute Ltd (CMPDIL).
The CMPDIL is an exploration, engineering, design and consultancy company, specialising in coal; the other CIL subsidiaries are all coal producers. Further, the Ministry of Coal holds 49% of Singareni Collieries, the other 51% belonging to the state government of Andhra Pradesh.
The exploration, mining, processing and beneficiation of atomic minerals in India are a government monopoly, and fall under the Department of Atomic Energy and its PSUs – the Uranium Corporation of India, and Indian Rare Earths.
The exploration for, and production of, petroleum and natural gas are the responsibility of the Department of Petroleum and Natural Gas, and its PSUs, which include Oil India, Bharat Petroleum, Indian Oil Corporation, the Oil & Natural Gas Corporation, the Gas Authority of India, Chennai Petroleum, and Hindustan Petroleum. Of India’s 18 oil refineries, 17 are in the public sector and only one in the private sector.
“The managements of the PSUs have autonomy” from their respective Ministries and departments, assures Consul. |
