India’s mining policy shift

Source– The post is based on the article “India’s mining policy shift” published in “The Hindu” on 8th August 2023.

Syllabus: GS3- Economy

Relevance: Issues related to mining sector

News– Recently, Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2023, in a bid to attract private sector investment in the exploration of critical and deep-seated minerals in the country.

What is the importance of minerals for India?

Various minerals play a pivotal role in a nation’s manufacturing, infrastructure development, and progress.

The shift towards clean energy in countries like India relies heavily on the accessibility of essential minerals like lithium, cobalt, graphite, and rare earth elements (REEs).

These minerals are also indispensable for producing semiconductors utilized in smart electronic devices, defense and aerospace gear, telecommunications technologies.

How much of India’s critical minerals are imported?

The scarcity of such minerals in specific geographic regions leads to a need for imports. It creates vulnerabilities in supply chains and the potential for disruptions.

For Example, China has substantial ownership of cobalt mines in the Democratic Republic of Congo, responsible for 70% of global cobalt production.

Prominent economies have recently taken measures to bolster their supply chain resilience for such minerals, and decrease their reliance on countries like China for supplies.

India’s dependence on imports for the majority of minerals on this list remains significant. India is entirely reliant on countries such as China, Russia, Australia, South Africa, and the United States for essential minerals like lithium, cobalt, nickel, niobium, beryllium.

Even for deep-seated minerals like gold, silver, copper, zinc, lead, nickel, cobalt, platinum group elements, and diamonds, India’s dependence on imports remains substantial.

In the fiscal year 2022-23, India imported nearly 1.2 million tonnes of copper valued at over ₹27,000 crore.

Why is the private sector vital for critical minerals exploration?

Research and the Centre for Social and Economic Progress (CSEP) highlight that India’s distinctive geological and tectonic conditions offer a favorable environment for potential mineral resources.

Only about 10% of India’s Obvious Geological Potential (OGP) has been explored, and less than 2% of this has been extracted through mining.

India has witnessed only a limited number of significant mineral discoveries over the past few decades.

Majority of exploration projects are undertaken by the government entity Geological Survey of India and other Public Sector Undertakings (PSUs) like the Mineral Exploration Corporation Limited.

Private sector involvement remains minimal. India’s mining policy had previously excluded private-sector explorers from participating in the initial exploration of minerals in untapped areas. Moreover, companies did not enjoy appropriate incentives.

The exploration process entails methods like aerial surveys, geological mapping, and geochemical analyses. So, it is a specialized, time-intensive, and financial activity. Less than 1% of examined projects ultimately progress into economically viable mines.

PSUs were better suited for exploring surface and bulk minerals like coal and iron ore. However, they faced difficulties in dealing with deep-seated and crucial minerals.

In countries such as Australia, private mining firms referred to as junior explorers take risks by utilizing their expertise and limited financial resources to conduct exploration.

Following the identification of these prospects, these private enterprises can sell their discoveries to larger mining corporations.

Is India’s mining policy conducive to private participation?

The Mines and Minerals (Development and Regulation) Act of 1957, has undergone several revisions since its inception, including recent amendments in 2015, 2020, and 2021.

In 1994, amendments were made to the Act to enable interested parties to apply for mineral concessions through a First Come First Served (FCFS) approach.

In 2015, amendments were made to the MMDR Act to enable private companies to participate in government auctions for Mining Leases and Composite Licences (CLs).

However, the inclusion of the Evidence of Mineral content (EMT) rule meant that only projects explored by the government were subjected to auction. It restricts the involvement of the private sector.

The amendments also allowed private firms to register as exploration entities, with funding provided by the National Mineral Exploration Trust (NMET) for exploration activities. Despite these changes, private sector engagement remained limited.

How does the Mines and Minerals Bill 2023 aim to encourage private players?

Read – Critical Minerals in India and Mines and Minerals Amendment Bill, 2023

What are some of the possible issues with the Bill’s proposals?

Read – Critical Minerals in India and Mines and Minerals Amendment Bill, 2023

Companies would be more willing to invest substantial sums if they were assured of utilizing any resources they unearth.

The new policy only permits the government to auction what an explorer has discovered. This contrasts with practices in other global jurisdictions, where private explorers can sell their findings to mining companies.