India’s Parliament is expected to consider a proposed new mining law in November, and the new legislation, which aims to open up the country’s resources to foreign and local private investment and increase the benefits from mining to local communities, could be in place some time next year.
Predictably, the law is viewed as too stringent by mining companies, while indigenous groups and environmental and human rights activists argue that it does not go far enough.
The new law, which is intended to replace the current 1950s Act, has been approved by a group of key Ministers, and will go to Cabinet for final approval before being put before Parliament, Indian Ministry of Mines Secretary Subramanyam Vijay Kumar said in a Toronto interview last month.
The goals laid out by the government in drafting the legislation are wide-reaching and, in some cases, seem almost irreconcilable.
For example, Kumar, who has been a central figure in the drafting of the new law, says that one of the key themes of the legislation is to attract private investment in the exploration and development of new mineral resources.
On the other hand, though, the law also aims to increase the benefits from mining to rural and indigenous communities and, as it stands, will force miners to share 26% of their profits with the local communities where they operate.
The profit sharing is over and above regular tax and royalties, and has been heavily criticised by mining and metals companies operating in India.
“The Act, as envisaged, will be a total disincentive to any future private investment in mining,” Federation of Indian Mineral Industries chairperson RK Sharma wrote in a June letter addressed to Kumar.
But Kumar noted that the Ministerial group that has already approved the proposed legislation includes the Ministries that have the biggest stake in the new law, including Finance, Steel, Forests, Tribal Affairs and so on.
“So we are pretty confident that, having got this cleared by such an eminent group of Ministers, our ability to steer it through the Cabinet and then into Parliament is now pretty easy,” he told Mining Weekly on the sidelines of a Canada-India Mining Forum, hosted by the Canada India Foundation.
Kumar said that, while the Parliamentary approval process can be lengthy, he expects a general consensus towards getting the law approved.
“There is a very large set of people that now feel that the Act is sufficiently reformist, and sufficiently detailed, in respect to environmental and social issues, which the old Act did not address.”
India, Asia’s third-biggest economy, could grow at 8% to 10% a year, according to forecasts.
The country is investing heavily in infrastructure, while trying to promote social and rural development, which, in turn, has translated into an apparently insatiable demand for industrial commodities.
Although the country has said it wants to increase renewable-energy generation, coal remains the backbone of energy supply and economic growth in the populous nation.
However, much of India’s mines at the moment, other than coal, are small, superficial operations, with 56,7% of the country’s mines currently in the range of zero to 10 ha, and another 23% in the range of 10 ha to 50 ha.
“Clearly, there is huge potential here for new projects and for modernisation, mechanisation, scientific management and downstream activities on the processing, environment and energy efficiency side,” Kumar said in a speech.
The country has an estimated 30% of the world’s total ilmenite resources, 13% of iron-ore, 8% of coal, 7% of chromite, 4% of bauxite and 3% of manganese ore.
But Kumar pointed out that the resource estimates were based on exploration “up to a limited depth only, which is why the govern-ment wants to get private companies with new and modern technologies exploring for deeper deposits”.
“There is no doubt that the potential for exploration and exploitation of all kinds of mineral resources is very large.”
The new mineral policy “signals a substantial and strategic shift in the way the Indian mining sector is developed and it now unequivocally enunciates that private investment will be encouraged in exploration, particularly for deep-seated mineralisation, using high technology”, he said.
One of the new terms provides for the extension of concessions rather than renewal, which should reduce waiting times and provide more security for investors, Kumar said.
Long and complicated approval processes for exploration and mining projects have put potential investors off India in the past.
A new ‘large-area prospecting licence’ has been introduced, which is a combined reconnaissance and prospecting licence.
It is aimed at incentivising high-tech explor-ation and would take a company from the reconnaissance and prospecting stages through to mining approvals, if a discovery is made.
It will also be easier to buy and sell concessions, which should attract both junior explorers and larger companies looking to acquire their discoveries, he said.
Regulatory and adjudicatory mechanisms that govern the mining and exploration sectors will also be strengthened.
Further, the geological survey of India is also being repositioned and restructured to provide the data required to facilitate exploration and investment by the private sector.
“The clear intention is to facilitate investors in making their decisions on the basis of best available data,” Kumar said.
The government hopes that greater private and foreign investment in exploration and mining in India will, in turn, lead towards more modern mining techniques.
The government wants to see the use of advanced geophysics and remote sensing to detect deep-seated mineralisation, as well as new technologies for beneficiation and value addition.
It also wants to see a move towards more scientific mining practices, including mechanisation, automation and computerised credit management systems.
While the short-term implications of mechanisation and modernisation might affect the employment for low-skilled workers, he pointed out that the changes could help generate opportunities elsewhere, including in downstream industries.
The Indian government is working on a skills mapping study to identify the skills and trades where training is needed, and plans to link the need for skilled workers to companies’ social responsibility requirements, so that local communities are the first to benefit, he said.
The new Mining Act also emphasises the need for a social licence to mine, and aims to make mining more acceptable to communities where operations are developed.
Some forest and tribal areas, which are inhabited by indigenous peoples, have been identified as likely to contain substantial mineral deposits, which sets up an inevitable clash between the local groups and com- panies wanting to develop the resources, with government Ministries caught somewhere in between.
“Exploration and mining cannot be taken up in a manner that is seen as a threat to local communities,” Kumar said.
“The issue has been how we involve the local community.
“We want to give them a say; we want them to feel that mining is not a threat to their existence but is possibly an opportunity for their develop- ment.”
The Indian government realises that there is a need for infrastructure development for these communities, but that ‘softer’ issues like purchasing power, skills development and community institutions need to be addressed, Kumar said.
“Much of the new law is focused on getting that mix right.”
According to local media, the new profit sharing rule would mean that companies that build new projects must share 26% of the profits or the previous year’s royalty, whichever is higher, with locally affected people.
The move is seen as an attempt to win over local populations and to avoid rebel activity and opposition to mining projects in remote areas.
However, Survival International campaigner Miriam Ross argues that the tribal people have the right to consent, not just to economic benefits, if their land is used for an activity like mining.
“While agreements to share the profits from mining with local people may in some cases be welcome, this is not a substitute for respecting indigenous peoples’ rights to their land and giving them the opportunity to accept or reject proposed developments,” she tells Mining Weekly.
Ross also emphasises that the economic development of tribal people should not be the responsibility of mining companies.
“If the only way people can get access to, say, basic healthcare and education is through a mining company, those people will be under enormous pressure to accede to whatever that company wants to do on their land.”
Meanwhile, in another sign that India is cracking down on the environmental and social effects of mining and the processing of raw materials, there have been a number of cases where plants or mines that have been operating for years suddenly find themselves on the wrong side of the law.
In September, a copper smelter owned by Vedanta subsidiary Sterlite Industries was ordered to close because of air and water pollution. The plant had been running for more than 12 years.
The court order was subsequently stayed by the Supreme Court of India, giving Vedanta temporary relief, but the original ruling was seen as an indication that Indian courts are increasingly determined to take a firm stand against environmental offenders.
A month earlier, LSE-listed Vedanta also failed to get approval for a bauxite mine in the southern State of Orissa, because of opposition by a local tribe and human rights groups.
The Ministries of Environment and Coal also recently defined and identified ‘no go’ areas of the country for coal mining, in a move aimed at protecting forest areas while, at the same time, increasing production from the country’s mines.
The no-go areas included significant coal resources in forest areas that were included in the future production plans of companies like Coal India.
However, recent reports suggest that some no-go land may be reclassified in order to allow large coal projects to go ahead, as the country faces pressure to feed demand for metallurgical and thermal coal.
Prime Minister Manmohan Singh’s office has even weighed in on the issue, informing the Ministry of Environment and Forests in May that the plan was “not agreeable”, because the no go-area would exclude 48% of known coal reserves from potential mining.
While India seeks to woo foreign and private investment in exploration, mining and bene-ficiation at home, Indian mining and metal firms are also becoming increasingly aggressive in seeking out and acquiring mineral resources elsewhere in the world.
Steelmaking ingredients iron-ore and coking coal are of particular priority.
India currently has a steel production capacity of 73-million tons a year, which is expected to rise to between 115-million and 120-million tons by 2012/13, joint secretary of the Ministry of Steel of India UP Singh said in a speech in Toronto.
Capacity is increasing, but the steel sector will struggle to meet demand over the next 10 to 15 years, he commented.
India is the number five producer of steel in the world, but the third-largest consumer.
Demand growth is expected to continue, as a result of increasing urbanisation, government spending on infrastructure, initiatives to alleviate poverty in rural areas and fast-growing private-sector investment, Tata Steel chief resident manager Chanakya Choudhary said.
Tata believes total steel production in India could rise to close to 170-million tons a year in the next decade, he said.
Supply of coking coal will become a “major issue” for domestic producers as steel demand and production levels rise, he commented.
Tata expects to produce about half of its own coking coal needs in India, but needs to get the rest elsewhere.
The company is looking for all kinds of opportunities, including acquisitions, joint ventures and strategic partnerships on coking coal assets outside India, Choudhary said.
Rana Som, the chairperson of State-owned iron-ore miner NMDC, said his company is also “aggressively” looking to acquire haematite iron-ore mines elsewhere in the world, particularly in Australia, Canada, Brazil and some parts of Africa.
Back home, the Indian government is proceeding with plans to sell shares in government assets, and was in the process of offering 10% of Coal India – the world’s biggest coal producer – in an initial public offering at the time of going to press.