The combination of India’s abundant
mineral wealth and its voracious appetite for raw materials has
never been sufficient to elevate the country to one of the
world’s top mining jurisdictions.
The lackluster state of Indian mining is clearly
illustrated by its coal industry. Indian coal reserves are
estimated at around 319 billion tonnes, yet the country remains
heavily dependent on coal imports.
The volume of foreign coal consumed in India has
increased significantly in the past three years, rising from
191 million tonnes in 2016-17 to more than 235 million tonnes
during 2018-19, with a value of around 1,708.8 billion rupees
With a view to enhancing production and efficiency
in the domestic coal sector, in February 2018
India’s government opened up commercial coal
mining to the private sector, having previously reserved most
of the available deposits for state-backed companies.
More recently, it decided to allow 100% foreign
investment in coal mining and related infrastructure projects,
removing a requirement for partial domestic ownership of
While these steps have largely been welcomed, and
are looked on as an approach that could be positively emulated
across the wider Indian mining industry, many stakeholders in
India are apprehensive that domestic and foreign investors may
be deterred by the government’s process of
allocating coal mining blocks through auctions.
The tepid response to the auctioning of coal
blocks to date suggests that these concerns are well
Of the five tranches of coal block auctions
concluded so far, the last two failed to attract any
Aside from a dislike of the auction process, the
multiple challenges facing India’s mining sector
are well-known, including disjointed policies, high taxes,
illegal and unscientific mining methods, environmental and
statutory process violations and lack of investment. And they
are frequently lamented by domestic and international
India produces around 95 types of mineral,
including four fuel, 10 metallic, 23 non-metallic, three atomic
and 55 minor minerals, from more than 2,400 known mines spread
across the country.
India has significant reserves of garnet, barites,
ball clay, china clay, dolomite, feldspar, fireclay, quartzite,
laterite, mica, ochre, quartz/silica sand,
talc/soapstone/steatite, vermiculite and zircon.
But despite being rich in a number of industrial
minerals, India imports sizeable volumes of these
Miners, processors and end-users often blame the
federal and state governments and the Indian mining ministry
for local shortages of these minerals, forcing buyers to source
products from abroad.
Many mining projects across the country have also
been stalled by legal challenges, delays in obtaining
environmental permits, and other regulatory and land
During an event organised by the Federation of the
Indian Mineral Industry (FIMI) held in Delhi in September,
Indian mines minister Prahlad Joshi spoke of the "pivotal role"
India’s mining industry is expected to play in the
government’s 'Make in India’
He outlined a government target to increase
mineral production by 200% in value terms over the next seven
years, but was sketchy on the financing and operational details
of how this will be achieved.
India’s National Mineral Policy 2019,
unveiled earlier this year, has the objective of attracting
more private investment into India’s mining
sector. While many are skeptical that the government will
finally be able to turn India’s mining industry
around with this ambitious new policy, most are anxious to see
"There is hardly any role for the private sector
in mining in the country," FIMI president Sunil Duggal
"The government exploration agencies have limited
expertise and technology, and a lack of infrastructure to
undertake exploration. We feel that the private sector,
particularly junior exploration companies, which have
state-of-the-art technologies and investment funds, can play an
important role in furthering exploration activities," he
"These companies raise funds for investment from
stock exchanges. There is therefore no risk of spending
taxpayers’ money on exploration, where the success
rate is 1:100," he said.
Duggal also repeated the frustration, voiced by
many, regarding the Indian government’s insistence
on auctioning mineral rights, instead of distributing them in a
less cumbersome and bureaucratic way.
"All [other] resource-rich countries allow the
junior exploration companies to bring the latest technologies
and funds for resource development, by adopting a
first-come-first-served principle for granting concessions," he
Changes to India’s mining
regulations, brought in since 2014 and which included the
introduction of mineral block auctions, have resulted in what
many in the industry view as considerable problems for the
These include creating a backlog of leases for
parcels of prospective land, which are now effectively stuck in
the government system.
During the years 2010-14, 494 leases were granted
for exploration, but in the post-auction period (2015-19), none
of these leases have been executed, leaving a total of 42
greenfield blocks unexplored, while just four leases out of 14
awarded for partially explored areas in Karnataka have been
Partially explored areas tend to have existing
environmental and forestry permits, but even the reduced
bureaucracy in these areas has failed to stimulate significant
The situation is expected to become even more
difficult from next year, when hundreds more mines in the
country will come up for auction.
According to the secretary general of FIMI, RK
Sharma, tenure of 329 non-captive mining leases is due to
expire on March 31, 2020.
Of these non-captive mines (commercial projects
not annexed to a large company that buys the
mine’s output), 48 are working mines which will be
forced to shut down while they are auctioned. The closure of
these mines will lead to a shortage of nearly 50-60 million
tonnes of raw material, according to Sharma.
"The auction route is a costly way of developing
mineral resources and leads to delays in mining," he said. "It
is a fact that the auction mechanism for granting mineral
concessions has not given the desired result during the past
India’s mining sector is one of the
highest taxed in the world. The effective tax rate in India
works out at about 58% for existing mines and 54% for new mines
granted through auction.
These taxes include corporate tax, dividend
distribution tax, royalties, District Mineral Fund (DMF),
National Mineral Exploration Trust (NMET) and corporate social
responsibility (CSR) taxes.
This compares with most other resource-rich
countries, where effective tax rates range between 30% and 45%,
according to government data published for popular mining
jurisdictions in South America and the Asia-Pacific region.
Indian miners are also burdened with a plethora of
other taxes and levies, including Net Present Value (NPV) for
surveys and mining in forested land, auction premiums,
performance securities, stamp duty and compensation for
These charges increase the cost of producing
minerals in India, making selling prices more expensive and
encouraging buyers to opt for cheaper imports.
"India’s mining sector contributes
just 1.53% to national GDP, compared with 7-7.5% in
resource-rich countries such as Australia and South Africa,"
"One of the biggest challenges for mining in this
country is the excessive taxation. The mining sector in India
is heavily taxed, not only in comparison to international
levels but also against other domestic sectors. This is having
an effect on all downstream industries," he added.
"The tax structure in the mining sector needs to
be rationalized to derive long-term benefits in terms of
sustained raw material security for industries," he said.
According to Arvind Singhal, managing director of
wollasonite producer Wolkem India, taxes on mining companies
make India’s mining industry cost-inefficient.
"Unless the government changes these policies, the
mining sector in India will not be able to grow quickly,
increase the number of areas under exploitation, or provide
employment opportunities and development in tribal areas of the
country," he explained.
Industrial minerals bear the
Because it is one of the largest raw materials
consumers in Asia and one of the major producers of basic
materials for construction and industrial use,
India’s persistent failure to feed itself from a
minerals perspective has long confounded economists and
The country has seen huge capacity additions and
steady growth rates in almost all industrial-minerals-consuming
segments, such as steel, ceramics, glass, paints, plastics,
cement and construction.
But domestic mineral production capacity has not
kept pace. This is partly due to India’s high
population density, environmental and biodiversity challenges,
which force policy makers to perform difficult balancing acts
between the interests of mining companies, people and
In the case of beach sand minerals, including
silica, titanium minerals and garnet, concerns about coastal
erosion and the effect of sand mining on shoreline ecosystems,
ostensibly led the Indian authorities to ban private sector
beach sand mining at the beginning of 2019.
Even though India’s beach sands are
rich in minerals and are naturally self-replenishing, the
Indian government accused private companies of over-exploiting
the deposits and made it illegal for anyone other than
government-owned companies to mine them.
Critics have suggested that the ban was partly
motivated by the government’s desire to reserve
the industry, worth 50 billion rupees ($702 million) per year,
for its own benefit. India has been exporting beach sand
minerals worth 35-40 billion rupees annually for the past three
years, according to export data.
The government has been scorned for deciding to
ban the practice of beach sand mining, rather than improve the
regulatory mechanism for one of India’s most
lucrative mineral industries.
VV Minerals, one of India’s leading
mineral sands producers, has indicated its intention to seek
mineral deposits abroad, including opportunities in Africa, to
compensate for the domestic ban. The company has so far applied
for licenses in Kenya and Tanzania.
"The government opened up beach sand mining to
private companies almost 20 years ago. Now, they have removed
this right overnight," S Vaikundarajan, chairman and founder of
VV Minerals said. "We expect to get all the requisite permits
for a 300 square kilometer site in Kenya and a 15 square
kilometer site in Tanzania in the next few months. We are
hopeful of being able to start production soon after."
Prospects for growth
Even if India does achieve its 200% production
increase target over the next seven years, the outlook for the
country’s economy is uncertain and some fear
government reforms will stifle growth – a factor which
may discourage some investors from funding major capacity
"Industrial mineral demand this year is subdued,
compared with previous years," Wolkem India’s
"We are sure this is a temporary phase and should
be over shortly. But the mining industry in India is facing
huge challenges, primarily because of changes in government
policies," he added.
"Mining’s contribution to
India’s GDP is declining, the number and size of
mining lease areas have reduced considerably, and new mining
concessions are not being granted. Under the current government
policy, all major mineral mining leases will terminate after 50
years’ tenure. Both captive and non-captive mine
leases will terminate on March 31, 2030, after which they will
be auctioned," he said.
Singhal believes that this policy acts as a
disincentive to business, because entrepreneurs who have put
hard work into making discoveries and building profitable mines
will have their concessions taken away from them without good
reason in little more than 10 years’ time.
Previous owners are allowed to bid for their
former mines, but there is no guarantee they will win them
back, especially if other, larger companies with deeper pockets
decide to bid for the assets.
"The people who discovered, explored and risked
their own capital to develop the mines may get left behind,"
An executive from a leading European industrial
minerals company with operations in India, who did not want to
be named, said that the new policies are designed to bring
mineral exploration and exploitation in India under government
"The performance of the government in auctioning
newly explored areas has been dismal," he said.
"After the auctions, hardly any mines have started
commercial production. This is primarily because there is no
single window for granting all the required licenses before the
auctions and the complicated and time-consuming post-auction
compliance policies," he added.
"No private company is allowed to make any
discovery or conduct exploration with the protection that what
they find will be allocated to them to develop," he said.
"There are huge restrictions and costs to transferring mineral
concessions, so nobody is incentivized to conduct exploration
on another company’s property, even if the owner
of the concession is doing nothing with it. This is blocking
the introduction of new technology and finance to
India’s mining sector."
*Conversions made October 2019
India’s National Mineral
In February this year, the Indian government
launched its National Mineral Policy (NMP) 2019.
The new policy will govern the
country’s mining sector, and replaces the 2008
version, stating that "exploration, extraction and management
of minerals have to be guided by national goals and
perspectives, to be integrated into the overall strategy of the
country’s economic development."
The NMP proposes to increase domestic production
of major minerals by 200% and to reduce India’s
trade deficit in minerals by 50% in seven years.
It aims to attract private investment through
incentives such as offering financial packages to investors and
first refusal at auctions to companies which have demonstrated
they have the means to develop deposits.
It also introduces the concept of Exclusive Mining
Zones, which will come with in-principle statutory clearances
for the granting of a mining lease, and emphasizes the need to
simplify the process for obtaining permits more generally.
NMP 2019 encourages mergers and acquisitions of
mining entities, and promises to ensure the transparent
transfer of mining leases, as well as the harmonization of
royalties and other levies and taxes with those common in
successful mining jurisdictions across the world.