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India Mining Report Q1 2012
Business Monitor International, Dec 2011, Pages: 81
Business Monitor International's India Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on India's mining industry.
India hosts a wide range of globally significant mineral resources, including four fuel minerals (such as coal and uranium), 11 metallic minerals (such as iron), 22 minor minerals and 52 non-metallic minerals (such as clay). The country ranks among the world's top five nations for its core competency commodity reserves of coal and iron ore. Iron ore reserves are estimated in the region of 23bnt (bn tonnes) and account for 6% of global reserves, while coal reserves are reported to be around 255bnt. India is the world's third-largest producer of coal, fourth-largest producer of iron ore and the fifth-largest producer of bauxite. However, only 10% of the country's landmass has been explored due primarily to significant regulation and bureaucratic obstacles.
India's mining industry looks set to post average annual growth of 5.1% in real terms from 2011 to 2015 to reach US$79.6bn at the end of the period, as output of key minerals looks set to grow in the coming years. However, growth in 2012 and beyond will continue to be curtailed by India's poor operating environment. A bright spot, however, is the increasing number of Indian companies venturing overseas to secure stable, long-term supplies of minerals such as coal and iron ore in a bid to meet fast-rising domestic demand.
India's regulatory environment is prohibitive for investors although recently proposed legislation is a step in the right direction. In the past, mining permits/licences are issued contingent on success in the reconnaissance phase. This practice exposes firms to high levels of risk. However, the proposed 2011 Mines and Minerals Development and Regulation (MMDR) Bill allows for the granting of nonexclusive reconnaissance licences and high-technology reconnaissance/exploration licences based on ability and intention to develop an area. The new bill also calls for a system for bidding licences, which can create a market for these licences, increasing transparency. A negative for the proposed MMDR Bill will be the additional taxes to be levied for community development.
India's mining sector is highly stratified. There are a number of giant, mostly state-owned mines that have an outsized effect on total output and at the same time there are a large number of small and inefficient mines, many of them illegal. According to Austrade, 5% of operating mines in India produce about 50% of the country's mineral output. Given the sector's strategic and economic importance, there is significant government involvement, with the sector dominated by state-owned companies or Public Sector Undertakings (PSUs) such as National Aluminium Corp (NALCO), SAIL, National Mineral Development Corp (NMDC) and Coal India. Indeed, according to the United States Geological Survey, PSUs contribute about 85% of India's total value of mineral production and are the main producers of key commodities such as coal, iron ore, aluminium, copper and gold.
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