India's mining industry: Challenges and potential

By Shruti Salwan
Published: Saturday, 21 May 2016

The Indian mining industry is best described as a success story still in the making. Despite holding reserves of 89 different minerals, Shruti Salwan, IM Analyst, examines why growth in the domestic mining industry has been relatively stagnant, failing to reap the benefits of an emerging middle class.

The majority of India's output is coal, accounting for 80% of total mining, while other groups of minerals make up the remaining 20%. 

India is the largest global producer of mica blocks and mica splitting. The country also ranks second in the world for its production of barites and chromite; third in the production of coal and lignite; fourth in iron ore and bauxite; fifth in the manganese ore and crude steel production; and seventh in worldwide aluminium output. 

Iron-ore,  copper-ore,  chromite, zinc  concentrates,  gold,  manganese  ore,  bauxite,  lead  concentrates  and  silver  account  for  the  entirety of  metallic  production, while limestone,  magnesite,  dolomite,  barites,  kaolin,  gypsum,  apatite, phosphorene,  steatite  and  fluorite  account  for  92% of  non-metallic  minerals.  

The contribution of mining to India’s GDP has declined from 3.4% in 1992-93 to 2.2% in fiscal year 2015-2016.  

Aside from the global headwinds all countries are facing post 2008, the Indian mining industry is also facing several challenges domestically in terms of toughening regulation, a weak and inadequate monitoring system, long clearance times for licences and permits, limited infrastructure and logistics and insufficient geophysical and geochemical data on mineral resources.

According to the Indian Mineral Federation, only about 13% of India’s 575,000 square kilometres of land with geological potential has been explored in detail, while the remaining areas and reserves offering untapped opportunities remain unexplored.

The reserves-to-production (r/p) ratio of various minerals in India remains low, reflecting significant unexploited opportunities in the country. Bauxite for example had an r/p ratio of only 21% with production of 15.36m tonnes against proven reserves of 321.26m tonnes in 2013, according to the 2013-2014 annual report published by the Ministry of Mines.

Another unexplored mining segment is the heavy mineral industry of India as regulatory changes, continuing illegal mining practices and confusion over the categorisation of minerals under atomic or beach sand minerals has kept further exploration and investment at bay. The minerals in question include ilmenite, rutile, zircon, garnet, monazite and sillimanite.

Atomic minerals are considered a source of energy, which can provide a substitute for fossil fuels and hydro-electricity, while the term is largely used in India to classify minerals under Part B of the First Schedule of the Mining and Mineral Regulation Development (MMDR) Act.

India's metallic mineral production,
2012-13, m tonnes

Iron ore

136,000

Bauxite

15,360

Lead and zinc ore concentrates

8,580

Copper ore and concentrates

3,640

Chromite

2,950

Manganese ore

2,320

Gold

470

Source: Indian Bureau of Mines 


India's non-metallic
mineral production,
2012-13 

Limestone

280,000

Dolomite

6,713

Silica sand

3,690

Kaolin

3,679

Gypsum

3,538

Phosphorite

2,124

Barytes

1,739

Steatite

939

Fireclay

817

Magnesite

213

Sillimanite

43

Source: Indian Bureau
of Mines


India's heavy mineral reserves

Mineral

Million tonnes

% global reserves

Ilmenite

593

35

Silimanite

226

NA

Garnet

168

40

Zircon

34

14

Monazite

12

71

Rutile

31

10

Source: VV Minerals 


Unlocked potential of the heavy minerals industry


With over 30% of global heavy minerals reserves, India accounts for just 4% of the world’s total production. The industry has faced tough competition from low cost Chinese imports, toughening regulations and a lack of investor-friendly policies, making it a difficult territory for further exploration.   

The minerals are largely found in five states; Tamil Nadu, Kerala, Andhra Pradesh, Odisha and Maharashtra, with only six companies in the sector, including Indian Rare Earths Limited (IREL), a public sector undertaking. 

However, it takes about seven or eight years to secure a lease for mining in beach sand deposits and separation of heavy minerals, followed by the need to obtain clearances from the Department of Atomic Energy and to secure a no objection certificate for mining in the Coastal Regulatory Zone (CRZ) from various authorities.  

This has deterred foreign direct investment, in addition to the absence of export incentives and anti-dumping duties on heavy minerals, which is mandatory for the further expansion of the country’s heavy mineral industry. 

Vaikundarajan Subramanian, managing partner of beach sand mining company VV Minerals, told IM that, in order to attract foreign direct investment and develop proper infrastructure for India’s mining sector, the government should reclassify beach sand minerals as non-atomic. 

There should be a set of clearly framed separate rules for atomic minerals, he said, while beach sands should be promoted to private enterprises for the purpose of bringing in the latest mining technology, boosting domestic employment and increasing the amount of royalties payable to the government.

While the government has proposed adjusting mining rules for atomic minerals on the basis of pre-determined radioactive threshold, concession period and leasehold area, allowing limited leeway to provincial governments under the new regulations, how soon this is likely to boost the industry remains in question.

India’s Heavy Mineral Reserves vs. Production

India1  

Source: Indian Bureau of Mines 


Monazite: Unmapped rare earth 

India is a large producer of rare earths with an annual output of 2,800 tonnes. However, with its estimated reserves of over 3m tonnes rare earths, the country has the potential to be self-sufficient in an industry presently dominated by China, which boasts a 105,000 tonne production capacity. 

Monazite is the largest present rare earth element in India, estimated at 11.39m tonnes. 

Between the years 2009-2014, India produced only 310.14m tonnes rare earth elements and sold 285.9m tonnes of the material, while in the year 2014-2015 it just sold 4.2m tonnes domestically. 

The government has taken the initiative to auction one of its rare earth blocks in the Barmer desert of Rajasthan and has worked to regulate the mining policy to encourage exploration.          

VV Minerals’ Vaikundarajan told IM that at current production levels, the Indian heavy minerals industry has the potential to produce 30,000 tpa monazite with 15,000 tpa rare earth elements. If ilmenite production levels increase to 25% of the world’s total, the industry will be able to offer 1.8m tonnes monazite and 90,000 tpa rare earth elements. 

IREL has also set up a 10,000 tpa monazite processing plant at its unit in Odisha to produce about 26 tpa nuclear grade ammonium di-uranate. It has additionally modified its facilities at Aluva, Kerala to
process about 5,000 tpa mixed rare earth chloride and to produce separated high purity rare earths. 

Nevertheless, India aims to accelerate its production to counter China’s monopoly in the market and supply of rare earths to Tokyo, following its deal with Japan in 2010.

Other underdeveloped minerals

Graphite 

With reserves of nearly 11m tonnes, India has been ranked as a major global producer of flake graphite, having deposits in different states including Jammu and Kashmir, Arunachal Pradesh, Gujarat, Jharkhand, Maharashtra, Karnataka, Kerala, Tamil Nadu, Odisha, Chattisgarh and Rajasthan.  

However, only 15% of these reserves are commercially exploited in the states of Jharkhand, Odisha and Tamil Nadu where they are mined and processed, while the deposits of economic importance located in Andhra Pradesh, Chattisgarh and Arunachal Pradesh remain unexplored. 

The country’s graphite production has been showing a downwards trend with the total flake graphite production for 2015 reported at only 18,000 tonnes, according to IM’s Natural Graphite Report: Strategic Outlook to 2020

This has turned India into a net importer of natural graphite with end consumers seeking to secure low-cost material from China. Trade statistics show that Indian imports of natural graphite have leapt 123% in last five years, from 12,400 tonnes in 2010 to 29,300 tonnes in 2015.

Consequently, refractory imports have been growing, making India the largest importer of Chinese refractory products, which have increased by 990% in the last ten years. 

States with maximum Monazite reserves (million tonnes)

India2  

Source: Indian Bureau of Mines 


Fluorspar 

A similar scenario currently prevails in India’s fluorspar space, with domestic production reported under 3,000 tpa of low grade material from the captive mine owned by Gujarat Mineral Development Corp. 

This is despite the country having mineral resources of 18.2m tonnes and domestic consumption of over 200,000 tpa. Currently, the leading suppliers to India are China, South Africa and Thailand.

However, to ensure a stable supply of fluorspar to India’s downstream industries, Navin, Gujurat Fluorochemicals, and Gujurat Mineral Development Corp. have formed a joint venture (JV) to develop fluorspar mines and an associated flotation plant. The new project is expected to come online within the next two or three years.

Barite 

Most of India’s barite (barytes) mines in Mangampet, southern India, are nationalised and controlled by Andhra Pradesh Minerals Development Corp. (APMDC), a public-sector unit of the Andhra Pradesh government.

Thus APMDC owns the bulk of India’s barite reserves and accounts for 98% of output. Every year, APMDC holds two tenders: one for bids to mine the barite, the other for bids to sell the material.

In April 2015, APMDC issued a new tender for the sale of 600,000 tpa drilling grade 4.20 specific gravity (SG) 'A-Grade’ material and drilling grade 4.10 SG 'B-grade’ barites from Mangampet in the Kadepa district of India.

Despite inviting bids from domestic and international exporters, APMDC has been struggling to sell material to regular markets as it fails to compete with Chinese and Moroccan supplies. 

According to Indian exporters, amid slowing demand it has become difficult to compete against the low-cost material available elsewhere, with the industry fearing the loss of major consuming Middle Eastern markets, one of the largest buyers of drilling grade barite from the country.  

Nevertheless, India remains largely self-sufficient in most of the primary mineral raw material to meet the increasing demand of its growing industrial consumption. 

Despite a high degree of self-sufficiency, some minerals, including flake and amorphous graphite of high-carbon content, kaolin and ball clay for special applications, very low-silica limestone and dead-burned (DBM) magnesite are imported to meet demand.  

Issues and challenges facing the mining sector 

Plagued by poor regulation

Regulatory loopholes in the mining sector mean that mining companies have been known to carry out illegal practices. Although the government has taken several measures to regulate the domestic mining sector by introducing changes through the Mines and Minerals (Development & Regulation) Act, 2015, there is still a long way to go.

Inadequate data

Limited geophysical and geochemical data is available regarding India’s mineral resources with insufficient information causing opaqueness in the sector. Inadequate communication is leading to confusion and misinterpretation by miners and governing bodies.  

Low investment and exploration

The exploration of new minerals, particularly deep-seated strategic minerals, the development of new technology and the implementation of the best mining practices are critically neglected areas in the country’s mining policy and investment budget.   

Abandoned mines

The number of abandoned mines is very high in India. Over the last decade, efforts have been made to strengthen regulations pertaining to mine rehabilitation and closures, but the situation is still far from satisfactory. 

Lengthy clearance windows

For obtaining environmental clearance and other different licences, it takes 12-24 months in India, delaying projects. This not only hampers further expansion in the mining sector but also works to keep potential investors away. In India it takes over four years to get a mining lease, compared with less than a year for other major mining countries such as Brazil, Chile, the US and Canada.

Self-sufficiency in minerals and metals

Commodity

Domestic consumption ('000 tonnes)

Supply
('000 tonnes)

Order of self-sufficiency (%)

Minerals




  Barytes

186

1739

100

  Bauxite

11019

15360

100

  Chromite

2602

2950

100

  Dolomite

6805

6713

99

  Feldspar

465

1291

100

  Fireclay

480

817

100

  Fluorite

63

3

5

  Gypsum

8667

10082

100

  Ilmenite

191

738

100

  Iron ore

103399

136019

100

  Kyanite

3

1

33

Limestone & other calcareous minerals

259314

279977

100

  Magnesite

490

213

44

  Manganese ore

4177

2322

56

Rock phosphate (including apatite)

4221

2125

50

  Rutile

26

16

62

  Sillimanite

20

44

100

Silica minerals

2285

5096

100

  Sulphur

1816

928

51

  Talc/steatite/pyrophyllite

368

1184

100

Metals




  Aluminium

2435

1675

69

  Copper (refined)

438

493

100

  Lead (primary)

248

118

48

  Zinc

649

704

100

Ferro-alloys




  Ferro-chrome

287

944

100

  Ferro-manganese

124

518

100

  Ferro-silicon

42

90

100

Source: Ministry of Mines


The outlook for India

India holds significant potential to further grow its mining industry. According to the Confederation of Indian Industry, the country’s growth is expected to be at 8% for the fiscal year 2016-2017. This resurgence in domestic economic growth will increase domestic consumption of metals and minerals. In 2014, India’s per capita consumption of total finished steel stood at 59kg compared to the world per-capita consumption of 217kg, leaving it room to grow, driven by investment in the construction markets.

Despite facing a "tough" 2016 amid weak global markets, major steps were taken by the government in 2015 to revive the industry including passage of the Mines and Minerals (Development & Regulation) Act and initiating the process for starting auction of mines bearing minerals such as iron ore, bauxite and limestone. 

The National Mineral Exploration Trust (NMET) was also asked by the government to encourage mineral exploration by working on various rules and guidelines to help improve the ease of doing business for miners. 

Another major initiative to curb illegal mining was undertaken via a partnership with the Indian Space Research Organisation (ISRO) for satellite surveillance of mineral blocks. Under the partnership, the ISRO will take satellite images of mines and update the Ministry of Mines fortnightly. 

This is likely to curb ongoing illegal mining operations in the country, resulting in the suspension of several mines in major producing states of Karnataka, Odisha, Jharkhand and Goa. 

In order for there to be a sustainable growth pattern in mining, the management of mineral resources has to be closely integrated with the overall mineral development and exploitation strategy, guided by long-term national goals and perspectives.