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Sustainably growing mining industry has ability to fuel growth of a vibrant economy |
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India has the fifth-largest reserves of iron ore in the world (28.5 billion tonnes), the fourth-largest reserves of coal (248 billion tonnes), thirdlargest reserves of chromium (57 billion tonnes) and the second-largest reserves of manganese (160 billion tonnes). Prime Minister Narendra Modi's agenda of 'Make in India', thus, requires a vibrant mining industry that provides jobs and livelihood to millions and uses the basic feedstock source to support the manufacturing industry.
Indian mining companies have contributed significantly in generating value for the economy transparently. Going by our experience, India's natural resources reserves may be only the tip of the iceberg. The true potential of mineral resources, whether of coal or iron ore, is yet to be tapped. Here are a few ways they can be: First, there needs to be greater focus on increased exploration and development of our natural resources. Take India's currentlyknown reserves of iron ore at 28.5 billion tonnes. Intensified exploration can add twice the current levels to the existing resource base.
But while India is very rich in iron ore, insufficient capital investment has led to iron ore shortages. Mining's economic potential can be further enhanced through focused and sustained investment in exploration, which requires adequate policy support, incentives and lowering existing tax costs. Second, mining is labour-intensive. It provides additional employment to several lakhs.
Increase in output means new job opportunities and improved livelihoods across the country. It would also improve the viability and confidence in the sector and make a significant contribution to GDP growth. Further, it will attract large amounts of capital investments for new exploration and development. Third, sustained global exploration, coupled with advances in exploration technology, has consistently increased known mineral resources worldwide. Large mining firms with a strong track record and using the latest cutting-edge technologies bring in best practices in health and safety.
They work with local communities while also providing jobs to millions. They use every tonne of the mineral in the mines, making a significant contribution to the value chain, So their operations in India need to be encouraged, as other countries have. Take Australia, which restricted iron ore exports until the 1960s fearing exhaustion of its 400 million tonnes (mt) resource. Today, the country exports more than 580 mt a year. In 2014, its exports are estimated to touch 700 mt with resources of more than 64 billion tonnes.
With greater focus on exploration, Australian success can be replicated in India. Exports aside, certain imports are required. The right mix of minerals is necessary to run plants at the optimum levels. Even large iron ore-producing countries such as Australia, Russia, Brazil, Canada and Ukraine import iron ore for steel production to get the right blends, and hence better efficiencies, for their steel plants. India produces all types of iron ore, but low-grade ore is not used by the Indian steel sector.
Higher grades of iron ore (lumps that have rich iron content of 61-63%) are used domestically. So there are very few takers of low-grade ore (fines, that have iron content of 55-58%). This results in selective mining. There is, however, an international market for lowgrade ore for getting the right blends. Promoting free export of low-grade ore will prevent its non-remunerative accumulation. This may create new environmental hazards. Exports of iron ore needs policy support from our government. Currently, benchmark global iron ore prices are at historical lows, at $80-85 a tonne.
This means low grade iron ore fines are sold in the international market at about $55 per tonne. With current export duty at 30% on top of low global prices, iron ore mining has become a loss-making proposition for domestic miners. We need to make this business competitive again. And that will truly increase government revenue without oppressive duties and taxes. The global experience suggests that a vibrant and sustainably growing mining industry has the ability to fuel the growth of a vibrant economy.
The mix of right policies and the right focus would also instil confidence and positive sentiment in the sector, pave the way for bridging the current account deficit - perhaps even generate a small surplus - and make India an economic powerhouse.
Source : economictimes.indiatimes.com
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