Managing the minerals

Under the initiative and guidance of the Union Ministry of Mines, the identification and management of the country's vast and varied mineral resources is making purposeful progress.

INDIA is endowed with rich mineral resources. With a history of mining activity dating back to the pre-Harappan period, it is today gearing to become a leading producer and exporter of a range of minerals.

For over 3000 years India was the only source of diamonds in the world. It can take pride in possessing the world's oldest zinc technology. The geological and metallurgical history of India is similar to those of the mineral-rich countries of Australia and South Africa and continents of South America and Antarctica, all of which formed a continuous landmass before the breaking up of Gondwanaland.

India has emerged as a leading producer of quite a few minerals, particularly industrial minerals. It is the world's largest producer of sheet mica and ranks third in the production of coal, lignite and barytes, fourth in iron ore, sixth in bauxite and manganese ore, 10th in aluminum and 11th in crude steel. It has stepped up the production of chromite and now has the third rank among the chromite producers.

Mineral exploration is carried out not only over the landmass but also offshore and on the seabed. India was granted the status of pioneer-investor by the United Nations in 1982 in seabed exploration. The country has secured an offshore mining site spread over an area of about 1,50,000 sq km in the central part of the Indian Ocean. This could yield 3 million tonnes each of copper and nickel, 80 million tonnes of manganese ore and half a million tonnes of cobalt.

The exploitation of the vast mineral reserves to meet the growing requirements for a variety of applications has therefore been a major economic activity, contributing significantly to the country's industrial development and export trade. Indicative of the significant strides made in this field over the past five decades is the increase in the mineral base from 34 in 1947 to 89 at present. Of this, four are fuel minerals, 11 are metallic, 52 are non-metallic and 22 are minor minerals. The total value of mineral production increased from Rs.580 million on the eve of Independence to an estimated Rs.6,19,210 million in 2002-03, excluding the atomic minerals. The production of metals is accounted for by iron ore, copper ore, chromite and/or zinc concentrates, gold, manganese ore, bauxite and lead concentrates. Among the non-metallic minerals, more than 90 per cent of the aggregate value is shared by limestone, magnesite, dolomite, barytes, kaolin, gypsum, apatite and phosphorite, steatite and fluorite.

Two States, Chhattisgarh and Jharkhand, account for 25 per cent of the mineral production, and 10 States, namely Andhra Pradesh, Assam, Gujarat, Maharashtra, Orissa, Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal and Karnataka, account for slightly less than 50 per cent of production. The remaining production, particularly of oil and gas, comes from offshore sources. Rajasthan, Chhattisgarh, Orissa, Karnataka, Andhra Pradesh, Gujarat and Goa produce most of the metallic and non-metallic minerals, while Jharkhand, West Bengal, Orissa, Madhya Pradesh, Maharastra and Andhra Pradesh produce coal.

MUCH of the credit for the development of this sector goes to the Ministry of Mines, Government of India, for moving with the times and bringing the mining sector into the ongoing reform process. Prior to Independence, all mining activity was in the private sector, which undertook it under the terms and conditions of the mining leases granted by the proprietors of the respective estates on tenure. After Independence, the management of mineral reserves became the responsibility of the Central and State governments. Government departments, at the Centre and the States, notably the Geological Survey of India (GSI) and the State Directorates of Mining and Geology have been undertaking survey and exploration work for minerals.

The Ministry of Mines is responsible for the survey and exploration of all minerals except natural gas, petroleum and atomic minerals and for the mining and metallurgy of non-ferrous metals such as aluminium, copper, zinc, lead, gold and nickel. It is also responsible for the administration of the Mines and Minerals (Development and Regulation) Act, 1957, or the MMDR Act, in respect of all mines and minerals other than coal, natural gas and petroleum. The Ministry has been carrying out survey and exploration through the GSI and Mineral Exploration Corporation Ltd. (MECL), and regulation and development work through the Indian Bureau of Mines (IBM). The Ministry has administrative and management control over MECL, National Aluminium Company Ltd, Hindustan Copper Ltd and Bharat Gold Mines Ltd. It has equity stake in Bharat Aluminium Company Ltd and Hindustan Zinc Ltd, both of which were privatised recently.

The GSI, established in 1851, has done geological mapping with respect to approximately 3.087 million sq km out of 3.146 million sq km, or 98 per cent, of the land area of India. The GSI is involved in the research and development of mapping and exploration techniques. It has a chain of modern laboratories in its operational bases.

The IBM is responsible for compiling exploration data and mineral maps and for providing access to latest information in respect of mineral resources. It has regulatory and service functions. It offers technical expertise and experience in the fields of geology, mine planning and feasibility studies. Its geological services include survey and preparation of mine plans, preparation of geological plans, preliminary geological appraisal of mineral properties including the formulation of an initial scheme of detailed exploration with estimates of cost and preliminary reconnaissance, quick survey to determinate potential areas out of large properties and so on. It offers technical consultancy services.

MECL undertakes detailed exploration of minerals and ores by means of drilling and exploratory mining. It is engaged in determining the existence of reserves for eventual exploitation.

THERE are also public sector companies in mining. The National Mineral Development Corporation, the Kudremukh Iron Ore Company, the Steel Authority of India Ltd and the Orissa Mining Corporation dominate the iron ore sector. National Aluminium Company accounts for about 35 per cent of bauxite mining and aluminium production. Hindustan Copper Ltd is a dominant player in copper ore mining. After the cessation of economic operations in Bharat Gold Mines Ltd in 2000, Hutti Gold Mines Ltd, a Karnataka government undertaking, is the only public sector enterprise engaged in the mining of gold. Rajasthan State Mines and Minerals Ltd and the Andhra Pradesh Mining Development Corporation are dominant players in rock phosphate and barytes respectively. At the time of Independence, mining operations were by and large labour-intensive. Following the emergence of public sector companies, large-scale mechanisation and state-of-the-art technologies have been adopted. The public sector undertakings account for more than 80 per cent of the total value of mineral production of all minerals excluding atomic minerals.

For four decades after Independence, mineral concessions were granted under the Mines and Minerals (Development and Regulation) Act of 1948, which was replaced with the fresh Act in 1957. The public sector entered the field of mining under the Industrial Policy Resolution of 1956, which reserved the mining of 17 minerals including coal, lignite, iron ore, manganese ore, chrome ore, gypsum, gold, diamond, copper, lead, zinc, tin, molybdenum and wolfram for the public sector. In regard to other minerals, barring minor minerals, the policy was that the state would establish new undertakings and at the same time private enterprise would have the opportunity to develop either on its own or with state participation. It was, however, stipulated that in the case of a private company engaged in mining activity, a majority of the directors should be Indian citizens and not less than 60 per cent of the share capital should be held by Indian citizens or Indian companies. This meant that foreign direct investment (FDI) beyond 40 per cent was not permitted.

The initiation of the structural reforms programme in 1991 brought in its wake liberalisation and globalisation in the mining sector. It was realised that most of the mineral deposits, which were found on the surface and easily extractable, had already been explored. So the time had come to explore more difficult terrain and greater depths employing sophisticated technology. In order to attract capital and technology from abroad, the curbs on private participation and the limits on foreign equity in Indian mining companies were eased under the National Mineral Policy of 1993. The MMRD Act, the Mineral Concession Rules and the Mineral Conservation and Development Rules were amended in line with the policy of liberalisation.

Under the liberalised policy, mining activity with respect to as many as 13 minerals, earlier reserved for the public sector, was thrown open to the private sector for exploitation. These were iron ore, manganese ore, sulphur, chrome, gold, diamond, copper, lead, zinc, molybdenum, tungsten, nickel and platinum. Around 15 minerals were removed from Part C of the First Schedule of the MMRD Act, leaving only 11 minerals, for which the permission of the Central government was made a requirement for the grant or renewal of mining lease (ML) and prospecting licence (PL). The maximum period for a mining lease was raised from 20 years to 30 years with the minimum period being 20 years. The period of validity of a prospecting licence was increased from two to three years.

So far as FDI was concerned, the 1993 policy removed the limit of 40 per cent. FDI was normally limited to 50 per cent but this limitation did not apply to captive mines of any mineral processing industry. Foreign equity beyond 50 per cent was considered on a case-by-case basis. All proposals for FDI were considered and approved by the Foreign Investment Promotion Board (FIPB). In 1997 the policy was fine-tuned to allow FDI up to 50 per cent after merely informing the Reserve Bank of India (RBI) and without having to go to the FIPB. Again, in February 2000, all FDI proposals were made eligible for automatic approval up to 100 per cent for all miners other than diamond and precious stones, for which the limit for automatic approval was fixed at 74 per cent. The automatic route for FDI and technology collaboration was made available for those who had any joint venture or technology transfer agreement. Investors in such cases will have to file a declaration before the RBI that they have no existing joint venture for the same area or the mineral concerned.

After the policy of liberalisation came into effect, entrepreneurs have taken 65 large area prospecting licences covering 90,000 sq km. As many as 119 reconnaissance permits covering over 1,55,000 sq km have been issued. The FIPB has approved 72 applications involving FDI of Rs.4,018 crores. Major foreign companies have evinced interest in joining hands with local companies in exploration work. Foreign capital and technology are felt necessary not only for exploration but for new mining ventures, rehabilitation of closed mines, working of lean deposits and complex ores, economical recovery of byproducts and utilisation of low-grade ores. There is potential in downstream operations such as smelting and refining.

The Ministry of Mines is keen to attract foreign capital and technology by streamlining the administrative machinery to make it more investor-friendly and cut down unwanted and avoidable delays inherent in seeking clearances from different departments. It has taken steps to address environmental issues and ensure that people affected by mining projects are properly rehabilitated and compensated.

The Ministry has constituted a Mineral Advisory Council under the chairmanship of the Union Minister, in which the State governments, industry and other stakeholders are represented. This, an apex think tank, advises the government on policy. The Ministry seeks to get the Council to meet at least once a year. Besides, whenever required a conference of State Ministers is held to sort out issues relating to the implementation of policies and programmes for the development of the sector.

India has been a traditional exporter of minerals. Minerals and metals exports account for about 20 per cent of total exports. There is potential for growth in exports and the increase in exploration and production resulting from enhanced private sector participation should help tap this potential optimally.