India is one of the few countries worldwide where steel demand will continue to grow in the forthcoming years. The demand growth rate is forecasted to be 5.4% in 2016-2017. This is mainly due to major projects in infrastructure of roads, railways and ports. Additional growth factors are the development of housing and rural infrastructure. This economical improvement is majorly supported by the Indian Government, which intends to invest $87 billion for new infrastructure & manufacturing projects in the next five years. Steel companies will benefit from future developments, such as the Government’s investment plans, higher road construction activity, increased pace of building new railway lines with plans for three new railway freight corridors & double track laying, and nationwide ongoing initiatives like Smart Cities. India’s Mining & Metallurgy Industry is indeed set for growth with the unending demand for raw materials. India is the second largest exporter of rare earths. The beach sand-mining sector, currently dominated by public sector majorly, has recently seen a positive turn with Government authorities now considering further opening up this sector to private companies. India has a large mineral resource bearing area of about 800,000 km2 of which only 10% has been explored by Mining companies and of this explored area, only 1% is currently used for Mining. This tremendous untapped potential could now be optimized with a new policy for exploration of minerals, which has been cleared by the Indian Government in June. What are the goals of this National Mineral Exploration Policy (NMEP)?
From April 2015 to February 2016, the Mining Industry in India registered a growth of 8.2%, which is an encouraging accomplishment after four consecutive years of backdrops. Estimates stated that the amount of metallic minerals mined in this period grew to 170 million tons from 140 million tons in the similar period of the previous fiscal year. The Indian Government approved the National Mineral Exploration Policy (NMEP) in June with the intention to further encourage private players, attract more FDI, and maximize the sector’s contribution to the economy.
This policy will pave the way for auctioning 100 new mineral blocks of 100 km2 each by this November in the first phase. The main aim of the NMEP is to boost Private investments into exploration of non-fuel and non-coal minerals by attracting both domestic and foreign mining companies. 45 of the 100 mines will be open for auction this fiscal year, and 17 more to come for re-bidding. Six mines which were auctioned already became operational this year. The selection of private explorers and the bidding process will be conducted through a transparent process of e-auctions.
The NMEP, to attract more private players (domestic and international), will provide incentives, such as a share in revenue from the successful bidder of the mineral block after e-auction for organizations engaged in regional explorations, or a refund of normative costs for exploring the different kinds of minerals in case the engaged explorer does not find any minerals in its area. After submission of the exploration data, in case sufficient resources were found, the lease for the Mining block will be auctioned. The Mining lease owner would then have to pay a royalty to the State Government and a respective percentage of this royalty will be obtained by the private exploration company. These incentives should mitigate the risks of explorations of private companies.
The policy also aims to bring together the best of knowledge & experience, modern technology, financial resources and trained manpower. Governmental reforms for the Mining Industry in the recent years already generated employment and development of the Mining affected areas, and the goal is tofurther boost this development. Modern technology and expertise is required for deep and concealed mineral deposit exploration. An Aero-geophysical Mapping program will be developed to identify these deep-seated and concealed minerals. The Government plans on spending $530 million over a period of seven years on this particular program.
Critics however argue that auctioning more Mines will not help the industry. Instead, the country should first utilize the full potential of the Mines that are already in operation. This fact is worth considering, as the NMEP wants to solve exactly this problem, the efficient use of resources in the Mining sector.
International as well as domestic companies can now use the momentum gained by the policy to explore geologically potential areas. Overall, with NMEP, international and domestic private companies will be encouraged to conduct mineral exploration and in turn gain a share of the revenues from the Mining sector. With the possession of many natural resources, high demand for minerals and the Government’s initiatives to promote the sector, the Mining Industry in India is looking forward to tremendous growth in the near future.
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