Unshackling the mineral sector

The national mineral policy now being formulated should set out a specific road map for the sector, and indicate the extent to which mining can contribute to the country's GDP

The Supreme Court had, in its August 2, 2017 judgment in Common Cause vs Union of India, directed the Union government to come up with a fresh and more “effective, meaningful and implementable” National Mineral Policy, for which the pre-legislative consultation on the draft National Mineral Policy has also been completed.

The draft NMP covers a number of positive aspects, such as transparency in allocating mineral resources, assured security of tenure, a technology-led governance mechanism, a time-bound clearance process and incentivising exploration through right of first refusals during auction of blocks.

However, there are still certain important points in the NMP that need to be dealt with prudently. The draft nicely articulates its vision as integrating exploration, exploitation and management of minerals in line with the country’s overall economic development, in a fair, transparent and environmentally sustainable manner. However, it does not contain specific targets in terms of setting goals as to where it wants India’s mineral sector to reach in the foreseeable future.
 

If we compare the draft National Mineral Policy with the National Steel Policy 2017, the latter clearly spells out what it aims at, such as increasing per capita steel consumption to 160 kg by 2030-31, from the current 61 kg, and meeting the entire demand for major steel products domestically by 2030-31; which may require 300 Mtpa steel capacity by then. It also projects a road map to achieve this target with detailed projections of sector-wise steel consumption and major raw materials requirements by 2030-31.

In view of the growing development needs of the country, the ministry of mines should take a strategic policy view on key minerals to be discovered and mined in India, in order to reduce dependence on imports and become self-sufficient. 

India currently imports various minerals and precious metals valued at more than $94 billion annually, which was 20 per cent of India’s total import bill of $466 billion in 2017-18. If we consider energy fuels such as coal, oil and natural gas, this exceeds over $226 billion — almost half of India’s total imports. It is therefore important to recognise what level of imports will be required as demand rises with acceleration in GDP growth.

The NMP should also indicate to extent to which mining can contribute to India’s GDP. Currently, the mining sector’s contribution is an abysmal 2.2 per cent, compared to 8.1 per cent for South Africa, 7.7 per cent for Russia and 6.9 per cent for Australia. India's geological resource base can sustain much higher levels of mineral development. 

The NMP talks about encouraging investment in exploration and incentivising it, but remains silent on the extent of obvious geological potential (OGP) to be targeted for exploration, or what should be India’s exploration budget to attain such a goal. Without an objective target, the likelihood of the policy achieving the stated vision is open to question.

Echoing the previous NMP of 2008, this draft also suggests a cluster approach for small mining leases, by granting deposits together as a single lease. For existing mineral resources, where the ore body is continuous, deep-seated and the leasehold area is fragmented between multiple leaseholders, the new NMP should encourage collaborative mining between leaseholders in the same cluster. Hence, those miners who are voluntarily participating within a geographically defined boundary may be permitted through necessary relaxation of the mineral concession rules to permit transfer of mineral concessions, whether acquired through auction or otherwise.

The draft policy does not adequately deal with a very important aspect of mineral development — the pricing mechanism. The draft merely says, “The approach shall be to make available mineral based materials to domestic users at reasonable prices as determined by market forces”. The term “reasonable prices” is ambiguous and subject to different interpretations. The new policy should encourage a mineral pricing system primarily determined by market forces, which are represented by globally recognised indices. 

The most important section of the new NMP, which relates to the government’s view on an institutional mechanism to decide the extent of mineral extraction, needs a much clearer approach. The draft policy merely says that an inter-ministerial body with members from the ministries of mines, earth sciences and environment and forests, and states at the ministerial and secretariat level may be constituted. This body may decide the mining limit based on studies on certain parameters, such as availability of mineral resources, the carrying capacity of the region, and the macro-environmental impact on the region.

The proposed institutional mechanism should use the latest technology for a mining surveillance and reporting system with the help of a blockchain model. This will help the regulatory machinery as well the mining industry to achieve a more transparent and efficient governance system.

The new National Mineral Policy should be a progressive one for balanced development of India’s mining sector and the Union government should be flexible enough to incorporate the required policy changes in mineral legislations. It should also be finalised expeditiously, so that the mining industry can significantly step up investments and production. The writer is former Chairman, Steel Authority of India Ltd