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The Sun rises

in the East

Since 1895
Contents

Foreword ................................................................................. 02
India’s mineral wealth ............................................................... 03
From a mineral basket to India’s growth hub .............................. 10
Brief profile of key eastern states .............................................. 13
The mining industry: key challenges .......................................... 22
The road ahead ........................................................................ 27
Foreword
Ernst & Young CII

Anjani K. Agrawal Kurush Grant


Partner & Sector Leader – Mining & Metals Chairman
Ernst & Young, India CII Eastern Region

According to an Ernst & Young capital confidence barometer study, leading India has emerged as one of the fastest-growing economies globally, with its GDP
metals and mining players the world over are more optimistic than they were at consistently growing at 8 to 9%. Demonstrating such high economic growth, India
the beginning of 2010 about the prospects for the economy (86%) and for their has emerged as one of the most energy-hungry countries and also a much sought-
companies (81%). On the back of the global financial crisis, such companies were after investment destination for global corporations. Recognizing the pivotal role
compelled to focus on their operational health – improving operational efficiency, of the mining sector in supporting this accelerated economic growth, the rapid
reducing costs, improving liquidity and repairing their balance sheets. Capital development of the sector has come into sharp focus in recent times.
and operating costs for this sector experienced less elasticity even during the
India is a among the world’s leading mineral producers, endowed with a rich
crisis and have bounced back strongly, challenging the margins for processors.
resource base of several major minerals such as coal, iron ore and bauxite.
Therefore, companies need to maintain their position on the marginal cost curve
The country offers an unparalleled spectrum of opportunity to both domestic and
without compromising on their competitive advantage.
global companies. In order to support and sustain high economic growth,
For miners, as commodity prices rise with improvements in margins, the focus the country’s mining sector is likely to require investments to the tune of
is back on supply side constraints – infrastructure, environment and other US$11.5 billion.
clearances, capacity expansion projects, access to natural resources, capital
As India readies itself to ramp up investments in the mining sector, the global
markets and skills. However, the business environment continues to challenge
mineral scenario is also rapidly witnessing significant changes. The Government of
the sector, with its emerging issues such as the volatility of prices, currencies and
India is actively engaged in policy debates to take the policy liberalization process
cash flows; risk appetites; capital availability and allocation; and, in recent times,
beyond 100% permissible FDI in the sector. The Government of India needs to
access to resources, resource nationalism and the social license to operate.
address specific challenges in policy; procedures for permits, clearances, licenses
Since the mining and metals sector has been one of the most resilient during the and land acquisition; infrastructure; funding; technology and environment. In
recession, it tends to become a target for many governments globally, as a source India, the majority of the mining industry is operational in the eastern states,
from which to replenish national treasuries and partly fund stimulus packages. owing to their rich mineral deposits. States such as Jharkhand, Orissa and
Several governments today are looking to initiate measures to extract high Chhattisgarh are especially dependent on mining for their economic development.
economic rent from projects in their countries. Such resource nationalism can Supported by their low-cost advantage, strategic location and an untapped
potentially place an additional cost burden on mining and metals companies and mineral base, the industry holds tremendous growth potential.
impose policy constraints.
Against this background, the CII Eastern Region has jointly undertaken this study
The minerals sector has been pivotal to the successful economic growth of focused on the concentration of mineral wealth in India. The study particularly
several economies globally, including Australia, South Africa, Canada and Brazil. highlights minerals present in Jharkhand, Chhattisgarh, Orissa and West Bengal.
Fortunately, India is uniquely positioned. It ranks among those countries with In addition, the report offers an in-depth look into mining activities within these
the highest resource base for minerals globally and also as a rapidly growing states, along with their respective economic profiles. Further, this publication
economy, thus serving as a strong growth market. The burgeoning demand for focuses on the challenges that the metals and mining industry currently.
metals from the infrastructure, real estate, industrial, automotive and consumer The report stresses on the need for collaboration between these states and
durables industries is expected to continue propelling the sector on a high-growth stakeholders to fully harness the mineral potential of this region.
trajectory for the next few years. The future certainly holds great potential – we
We hope that all stakeholders will benefit immensely from this report.
need to seize the opportunities that await us at present. The eastern states can be
the largest beneficiaries of this economic cycle, provided we develop a framework
that makes sense for stakeholders – employees, entrepreneurs, investors,
regulators, government and, most importantly, communities. Yet, such solutions,
in order to be effective, must be balanced and sustainable.

We sincerely hope this report provides rich insights on the challenges for the
sector and the shifting priorities that must be addressed to ensure its progress in
the years to come.

The Sun rises in the East | 2


01
India’s mineral wealth

3 | The Sun rises in the East


The mineral wealth of a country is pivotal to that country’s Production of minerals in India (2008)
industrial development, since minerals provide basic raw
Mineral % of the world’s India’s global rank in
material for most industries. As an ancillary activity of the
production production
manufacturing industry, mining contributes to wealth creation
Coal 7.5% 3
through foreign exchange and employment generation. A
Barytes 17.3% 2
number of countries across the globe have prospered through
Chromium ores and 16.2% 2
the proper utilization of their mineral resources. Some notable
concentrates
examples include South Africa, Australia and Canada.
Iron ore 9.9% 4
Bauxite 7.3% 6
India’s mineral profile Manganese 6.3% 6
India produces 86 varieties of minerals, including 4 types of Alumina 3.7% 7
fuel minerals, 10 varieties of metallic minerals, 46 non-metallic Source: World Mineral Production 2004-2008, British Geological Survey
varieties of minerals, 3 atomic varieties of and 23 minor
minerals1. The country holds abundant reserves of key minerals
Mineral production and exports
such as iron ore, bauxite, dolomite, gypsum, limestone and
mica as well as adequate reserves of chromite, manganese, zinc The Indian mining and quarrying sector contributes almost
and graphite. In fact, India is among the world leaders in the 2% to the country’s economy. During FY10, the total value
production of key minerals such as iron ore and bauxite. of minerals produced in India was valued at INR1.28 trillion.
Between FY06 and FY10, the production of minerals in India
has grown at a CAGR of 9.1%. Fuel minerals contributed
Availability of minerals in India
approximately 62.2% of this growth, while metallic minerals
Mineral Abundant Adequate Deficient Scarce
contributed around 21.6%. Non-metallic (including minor)
Metallic Iron ore Chromite Chromite Nickel,
minerals contributed the remaining 16.2%. The public sector in
minerals (metallic), (refractory) Tungsten,
India plays a major role in mineral production, accounting for
(ferrous) Manganese Cobalt,
Molybdenum almost 72% of total production in FY09.
Metallic Bauxite Zinc Bauxite Antimony,
minerals (metallurgi- (chemical Gold,
(non- cal) grade), Platinum Exhibit 1: Contribution to India's GDP
ferrous) Copper, Lead group of
minerals 3.00%
Industrial Dolomite, Graphite Apatite, Sulphur, 2.11% 2.09% 1.98% 1.92% 1.91%
minerals Gypsum, Rock- Potash 2.00%
Limestone, Phosphate,
Mica Kyanite 1.00%
Source: “Indian mineral sector and its export potential,” Occasional Paper No.
122, Export Import Bank of India 0.00%
FY06 FY07 FY08 FY09 FY10
Source: Handbook of Statistics on the Indian Economy 2008-09,
Reserve Bank of India and Annual Report 2009-10, Ministry of Mines

Exhibit 2: Types of minerals , FY10

16.2%
1 Source: Ministry of Mines 2009–2010 annual report

Note: The government has notified minerals as either major or minor


based on their end use. Major minerals include fuel, metallic and non- 62.2%
metallic minerals. Fuel minerals include coal, petroleum, natural gas and
atomic and radio-active minerals. Metallic minerals are sub-divided into 21.6%
ferrous (Iron ore, manganese etc.) and non-ferrous (bauxite, gold, silver
etc). Non-metallic minerals include limestone, dolomite and mica. Minor
minerals, on the other hand, include boulder, shingle, brick-earth and
marble.
Fuel minerals Metallic minerals Non metallic minerals
Source: Annual Report 2009-10, Ministry of Mines

The Sun rises in the East | 4


During FY09, the sector felt the ripples of the global financial Exhibit 5: Top mineral-producing regions in India, FY09
crisis, with sectoral investment decreasing from a high of 40%
19.4%
during FY06 to a low of -7.8%. Along similar lines, the growth
rate of the sector’s GDP decreased to 1.6% in FY09, down from
a high of 8.7% during FY07. However, sectoral GDP seems to
37.6%
have recovered, growing at 10.8% during FY10. 14.7%

Exhibit 3: Sectoral growth


15% 60%
40.0% 10.8% 40%
10% 8.7% 11.6%
7.8%
3.9% 20% 8.9%
5% 14.6% Offshore areas Orissa Chhattisgarh
1.6% 0%
1.3% 3.5% Jharkhand Madhya Pradesh Others
0% -7.8% -20%
Source: Annual Report 2008-09, Ministry of Mines
FY06 FY07 FY08 FY09 FY10
Growth rate of Sectoral GDP During FY10, the total number of mines operational in India
Sectoral investment growth stood at 2,729 compared with 2,964 in the previous year.
Source: Economic Survey 2009-10 and Economic Outlook 2010-11 According to the Ministry of Mines’ 2009–2010 annual report,
*Including major and minor minerals operational mines within the country generate annual daily
employment of close to 0.15 million.
Exhibit 4: Production of minerals in India (INR billion)*
The export of minerals and ores* from India between FY05 and
1,500 FY09 increased at a CAGR of 11.5% to be valued at INR1,087
1,198.0 1,222.8 1,279.2
1,044.9 billion. Diamonds constitute the most significant mineral export
1,000 903.2 category, accounting for almost 66% of overall exports from
India in FY09. Other large mineral export categories include
500 alumina and chromite. On the other hand, imports of minerals
and ores* between FY05 and FY09 grew at a CAGR of 24.4%
0 to reach a value of INR1,539 billion. Diamonds also represent
FY06 FY07 FY08 FY09 FY10 close to 49% of all mineral and ore imports in India. Coal and
Source: Annual Report 2009-10, Ministry of Mines copper, which contribute 27% and 12% to national mineral and
*including major and minor minerals
ore imports, respectively, follow.

Exhibit 6: The import and export of minerals* (INR billion)


Mineral production in India is concentrated in Chhattisgarh,
2,000
Jharkhand, Orissa and West Bengal. In fact, the states
1,539
collectively contribute approximately 35% of national mineral 1,500
production. In fact, it would be apt to say that these regions 1,087
948 828
collectively constitute the “mineral basket” of India. 1,000 795 809 852
704 643 682
During FY09, Orissa topped the list of mineral-producing 500
states in the country, contributing 14.7% to total production.
0
Chhattisgarh and Jharkhand closely followed, contributing FY05 FY06 FY07 FY08 FY09
11.6% and 8.9% respectively in national mineral production Exports Imports
during FY09.
Source: Annual Report 2009-10, Ministry of Mines
* Excluding Petroleum and Natural Gas

5 | The Sun rises in the East


Mineral policy and regulation2 (excluding coal, natural gas and petroleum). Key bodies under
the Ministry of Mines include the GSI, the Indian Bureau of Mines
The Mines and Minerals (Development and Regulation) Act and the Directorate General of Mines Safety. At the state level,
1957 (MMDR Act) lays down the overall framework for the respective regional arms of the Directorate of Mining & Geology
regulation of mines and the development of minerals in India regulate industry activity. Meanwhile, the Ministry of Coal is
(except petroleum and natural gas). According to the Mineral responsible for the development of coal reserves in India.
Concession Rules 1960 (MCR 1960), which was framed under
MMDR Act, the Central Government grants concessions for In an effort to improve prospecting and mining activity in India,
all minerals other than atomic and minor minerals. State the GoI issued the National Mineral Policy in 2008. Succeeding
governments, on the other hand, frame rules for the mining the earlier National Mineral Policy 1993, this policy envisaged
of minor minerals. In order to promote the conservation and an improved regulatory environment and more transparency
systemic development of minerals, the Central Government has in the allocation of concessions. According to the policy, the
also framed the Mineral Conservation and Development Rules, GoI will ensure basic uniformity in mineral administration
1988 (MCDR). across the country. As a result, it is expected that key acts and
regulations such as the MMDR Act, MCR 1960 and MCDR will be
Types of mineral concessions comprehensively amended in line with this policy.
Type A snapshot
Reconnaissance • RPs are granted for a period of three years The Indian mining industry: significant
permit (RP) for the preliminary prospecting of a mineral growth potential
through geophysical, geochemical surveys and
geological mapping.
Iron ore
• RPs can be granted for a maximum of 10,000
sq. km., subject to the condition that a single Iron ore is the most important raw material used in the
RP does not exceed 5,000 sq. km of area. production of steel. India is among the top five iron ore-
Prospecting • PLs are granted for a period of three years producing countries in the world alongside China, Australia,
license (PL) for undertaking operations for exploration or Brazil and Russia. While Russia accounts for the largest share
the proving of any mineral deposit. PLs are in global iron-ore output (80% in 2008), China is the largest
granted for a maximum area of 25 sq. km. importer of iron ore, largely due to insatiable demand from the
country’s steel industry and its lack of quality reserves.
• PLs can be renewed in a manner that does not
stretch the overall period beyond five years. Exhibit 7: Production of Iron ore in India
• An RP holder has preferential rights to obtain 250
a PL. 213.2 215.4
187.7
200
Mining lease • MLs are granted for undertaking operations 165.2
145.9
million tons

(ML) to obtain a mineral in a maximum area of 10 150


sq. km.
100
• MLs are granted for a period ranging from
20 to 30 years. They can be renewed for 50
periods below 20 years.
0
Source: Ministry of Mines 2009–2010 annual report FY05 FY06 FY07 FY08 FY09
Source: Federation of Indian Mineral Industries
Three ministries at the central level are responsible for
regulating various aspects of the Indian mining industry.
The Ministry of Mines is the main regulating body for the
administration of the MMDR Act for all mines and minerals

2 “Minerals Legislation,” India Yearbook 2010, Publications Division,


Ministry of Information & Broadcasting, Government of India, p.689;
Ministry of Mines 2009–2010 annual report; “National Mineral Policy
2008,” Ministry of Mines website, http://mines.nic.in/writereaddata/
filelinks/88753b05_NMP2008.pdf, accessed 30 August 2010

The Sun rises in the East | 6


Exhibit 8: Iron ore exports from India Exhibit 9: Estimated use of steel per capita (kg)
500
120 53.5% 48.7% 60%
50.9% 50.4% 400
100 50%
32.1% 321
Million tons

80 40% 300 227


60 30% 200 148 214
40 20% 133 179
100 35
20 78.1 84.0 91.4 68.5 108.5 10% 29 47
0 0% 0
FY05 FY06 FY07 FY08 FY09 2001 2004 2007

Exports % of total production India China World


Source: Steel Statistical Yearbook – 2008, World Steel Association
Source: Federation of Indian Mineral Industries and Ministry of Steel
Despite its low consumption of steel, India is on the verge of
India has approximately 25 billion tonnes of iron-ore reserves touching a milestone in terms of material consumption. India’s
comprising hematite (58%) and magnetite (42%). The per capita GDP (PPP) is poised to exceed a value of US$3,000.
production of iron ore in the country grew at a CAGR of 10% This is significant, as after crossing the same value in 2003,
between FY05 and FY09 to reach 215.4 million tonnes in China’s per capita steel consumption increased at a CAGR of
FY09. Government-owned NMDC is India’s largest producer and 15% between 2002 and 2007.
exporter of iron ore, while Sesa Goa is the largest private sector
producer and exporter of iron ore in the country. Iron ore is also Exhibit 10: China GDP per capita (PPP) and Per capita
India’s most widely exported mineral, accounting for more than steel consumption
50% of total ore and mineral exports.
6,000 321 400
298
The NMDC plans to commission three new iron-ore mines over 276 320
the next three years to take the total production of iron ore in 5,000 227
199
240
FY12 and FY13 to approximately 38.8 and 43 million tonnes, 4,000 133
160
respectively, so as to cater to the rising demand for iron ore 109 160
in the country. The state-run miner also plans to expand its 3,000 80
3,217
exploration activities by acquiring more prospecting licenses 2,880
2,000 0
and mining leases in both India and abroad.
2000

2001

2002

2003

2004

2005

2006

2007

Steel Per capita GDP (PPP)


India is the fifth-largest producer of crude steel in the world and Apparent per capita consumption of steel
is expected to become the second-largest global producer by Source: IMF and World Steel Association
FY16 (2015–16). During FY09, India was the largest producer
of direct reduced iron (DRI) in the world. According to a survey Exhibit 11: India GDP per capita (PPP)
by the World Steel Association, per capita consumption of steel 3,446
in India stood at 47 kg in 20083. The Joint Plant Committee’s 3,500
3,176
survey in 2008 subsequently corroborated this figure. This
figure is quite low when compared with the global per capita 3,000
average of more than 210 kg and an even higher per capita 2,941
consumption of more than 400 kg for developed nations4. 2,500

2,000 1,595

1,500
2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

3 Year-end review 2009, Ministry of Steel, Government of India, Press


Information Bureau website, http://pib.nic.in/archieve/others/2010/
jan/r2010010102.pdf, accessed 25 August 2010 Per capita GDP (PPP)

4 Source: Ministry of Steel 2009–2010 annual report Source: IMF

7 | The Sun rises in the East


In a sign of things to come, various state governments in India Exhibit 13: Production of coal in India (million tonnes)
have signed more than 200 memorandums of understanding 497
(MoUs) with various players for the creation of steel capacity to 500 462
431
407
the tune of 275.7 million tonnes. Interestingly, India’s mineral 400 382
basket contributes more than 90% in terms of the number of
MoUs signed as well as expected capacity addition. 300

200
Steel MoUs in India, by state
Serial State MoUs Capacity (in 100
no. million tonne 0
per annum) FY05 FY06 FY07 FY08 FY09
1. Orissa 49 75.7 Production
2. Jharkhand 65 104.2 Source: Ministry of coal, Government of India

3. Chhattisgarh 74 56.6 Coal production in India is primarily based out of the country’s
eastern states, especially Jharkhand, Orissa, Chhattisgarh
4. West Bengal 12 21.0
and West Bengal. These states collectively account for
5. India’s mineral basket (Orissa, 200 257.5 approximately 80% of India’s coal reserves. However, the
Jharkhand, Chhattisgarh and consumption of coal is distributed across the country,
West Bengal) accounting for more than 55% of India’s total energy supplies. In
6. Other states 22 18.2 fact, according to the Planning Commission, approximately 43%
of coal in India is likely to travel a distance of more than 1,000
7. Across India 222 275.7 km from the pithead by FY12. Thus, infrastructure facilities
Source: Ministry of Steel 2009–2010 annual report across the four eastern states are of paramount importance.

Coal demand in India is likely to further accelerate, driven by the


Coal addition of 60 GW of thermal power and capacity expansion in
steel and cement, by 50 million tonnes and 115 million tonnes,
India has almost 13% of the world’s recoverable reserves of
respectively, by the end of Eleventh Five Year Plan (2007-
coal and ranks third in terms of annual global production,
2012) in 2012. According to estimates, coal demand in India
contributing 8% to production in 2007. Public sector
between FY09 and FY12 is likely to grow at a CAGR of 12%5.
undertaking (PSU) company Coal India Limited and its
Moreover, according to the GoI’s estimates, India can expect a
subsidiaries are the largest coal miners in the country,
shortfall of 83 million tonnes of coal by the end of the Eleventh
contributing more than 90% of India’s coal supply. Between
Plan. This shortage will have to be met through imports.
FY05 and FY09, coal production in India grew at a CAGR of
6.8%. Key sectors consuming coal in India include power, steel,
Exhibit 14: Import of coal in India (million tonnes)
cement and fertilizers.
60 54 59
Exhibit 12: Key sectors consuming coal in India 49
4
(April to December 2009) 41 4
40 3
32 28
23 35
24 3 22
Others, 2 12
41.2% 20
Power, 9
57.2% 17 17 22 22 24
13
0
FY04 FY05 FY06 FY07 FY08 FY09

Fertilizers, Non coking coal Coke Total import


0.2% Source: Ministry of Coal, Government of India

Cement,
Steel,
0.6%
0.7%
5 Source: “India Coal Sector- Fault Lines,” April 2010, via ISI Emerging Markets
Power Steel Cement Fertilizers Others

Source: Annual Report 2009-10, Ministry of Coal

The Sun rises in the East | 8


Aluminum Since FY05, the production of aluminum in India has grown
at a CAGR of 11.3% to reach 1.4 million tonnes in FY09.
With a share of 6.8% in the world’s total reserves of bauxite, Simultaneously, the consumption of aluminum is also on the
India ranks fifth globally for its bauxite reserve base. Nearly upswing, witnessing a CAGR of 8.6% between FY07 and FY09.
55% of India’s bauxite reserves are concentrated in Orissa, Key sectors consuming aluminum in India include electricity,
Jharkhand and Chhattisgarh. The production of bauxite in the construction, transport and packaging. It is estimated that the
country has grown from 11.9 million tonnes in FY05 to 15.5 demand for aluminum in India will grow at a CAGR of 5% to 6%
million tonnes in FY09, growing at a CAGR of 6.8%. to reach a value of 1.6 million tonnes during FY12. Key drivers
Indian aluminum companies are on a most lucrative quartile of this demand growth are likely to be the automobiles and
along the industry’s global cost curve. This trend can be consumer goods industry, whose demand for aluminum in the
primarily attributed to India’s presence of large reserves of medium term (FY12) is expected to grow at between 9%–11%
quality bauxite and its low labor and power costs (backward and 7%–9%, respectively. Moreover, the per capita consumption
integration into power). National Aluminium Company (NALCO), of aluminum remains at 1 kg compared with an average of 30
Hindalco Industries, Bharat Aluminium Company (BALCO), kg in the developed world, which reflects the growth potential
Madras Aluminium Company (MALCO) and Vedanta Aluminium of aluminum in India.
Limited are among the leading companies that produce this
metal in India. Exhibit 17: Consumption of aluminium in India
(million tonnes)
Exhibit 15: Production of aluminum in India (million tonnes)
2.0
2.0
1.5 1.27 1.31
1.5 1.35 1.11
1.15 1.23 1.0
1.00
1.0 0.88
0.5

0.5 0.0
FY07 FY08 FY09
0.0
FY05 FY06 FY07 FY08 FY09 Consumption
Source: Ministry of Mines
Production
Source: Ministry of Mines Exhibit 18: Trends in sales of aluminium
100%
Exhibit 16: Key sectors consuming aluminium in India 23.5% 24.4% 28.6%
75%
17%
50%
10% 76.5% 75.6% 71.4%
42% 25%

0%
FY07 FY08 FY09

Domestic Export
14%
Source: Ministry of Mines

17%
Electricity Construction Transport
Packaging Others
Source: Crisil Research

9 | The Sun rises in the East


02
From a mineral basket
to India’s growth hub

The Sun rises in the East | 10


The eastern states: India’s mineral basket Exhibit 20: Share of eastern states in India's GDP (2008–09)

India’s mineral basket, comprising Chhattisgarh, Jharkhand, 12.8%


Orissa and West Bengal, represents more than 80% of the
country’s key minerals such as coal, iron ore (hematite),
chromite and nickel. The region has proven reserves of more
than 40 different types of mineral ores.
87.2%
Exhibit 19: Large concentration of key mineral reserves in
the eastern states
Percentage of country’s ore/
mineral reserves in the four
eastern states Eastern-4 Rest of India
Coal – 80%
Iron ore (Hematite) – 80% Source: CMIE
Chromite – 95%
Exhibit 21: Share of eastern states in India's population

Nickel – 92%
Cobalt – 69% (2008–09)
Bauxite – 55%
15.8%
Four Eastern States – The
Mineral Basket of India
Other major mineral producing
states

84.2%
Source: Indian Minerals Yearbook 2008, Indian Bureau of Mines and
Ministry of Coal, Government of India
Eastern-4 Rest of India

The presence of large reserves of key minerals and the Source: CMIE

expected takeoff in mineral demand by downstream industries


However, over the past five years, the contribution of India’s
in the near future is likely to help position the four eastern
states to the country’s GDP has decreased marginally to
states competitively.
reach a value of 12.8% in FY09, even as the proportion of the
population remained nearly the same. It is important to note
The mineral basket: immense potential that during this period, Orissa’s and Chhattisgarh’s real SGDP
The period between FY05 and FY09 was particularly impressive grew at 10.2% and 9.7%, respectively, which is higher than the
for the Indian economy. The country witnessed average real national average. However, West Bengal and Jharkhand grew at
GDP growth of 8.5%. In FY05, Chhattisgarh, Jharkhand, West 7.3% and 5.4%, respectively.
Bengal and Orissa collectively contributed 13.2% of the Indian
Exhibit 22: Average SGDP growth comparison with rest of
GDP, with a share of 15.9% in the overall population.
the country
12.0% 10.2% 9.7%
8.5% 8.5%
9.0% 7.3%
6.0%
3.0%
0.0%
FY05-09

Orissa West Bengal Jharkhand


Chhattisgarh Average Real GDP growth India
Source: CMIE State Analysis Services

11 | The Sun rises in the East


Moreover, Chhattisgarh, Jharkhand, West Bengal and Orissa While the country’s mineral basket is yet to achieve economic
have some way to go before they catch up with the rest of the progress that is proportional to its potential, the region is well-
country in terms of per capita GDP. While West Bengal was once positioned, through suitable legislative and regulatory changes,
close to the overall average, a widening gap has been observed to take advantage of rising domestic demand and become the
in recent times. The same is true for other states, where the growth hub of the country.
differences were already significant.

Figure 23: Per capita SGDP comparison with rest of


the country
31,278
27,062
23,894

22,359

30,000
21,184

20,806

17,956
16,117
15,180

14,712

20,000

10,000
FY05 FY09
Orissa West Bengal Jharkhand
Chhattisgarh National average
Source: CMIE State Analysis Service

International case studies of mineral-related growth in the economy�6, 7


Case study I: The Australian mining industry and its Case study II: South Africa and its mineral economy
importance to the economy
• M
► ineral wealth
• M
► ineral wealth
• S ► outh Africa has the world’s largest reserves of
• A ► ustralia is the world’s largest producer of bauxite, chrome ore, gold, manganese ore, platinum group
alumina, rutile, ilmenite, zircon and tantalum. metals and vanadium.
• I► t is also the world’s second-largest producer of • O ► ther abundant minerals include antimony, lead,
uranium, lead, zinc and lithium. phosphate rock, titanium minerals and zirconium.
• I► t is the world’s third-largest producer of gold, iron ore, • T ► he continent is among the world’s leading producers
diamonds, manganese, nickel and niobium. of alumino-silicates, manganese ore, platinum group
• E
► conomic impact (FY08–09) metals, vanadium, gold and titanium minerals.
• E
► conomic impact
• T ► he country’s mining industry contributed almost 8%
to the GDP. • M ► ining and quarrying contributes almost 5.8% to South
• T ► he sector generated direct employment of almost Africa’s GDP (2007).
133,200 and indirect employment of 200,000. • T ► he mining sector accounts for 6% of the continent’s
• I► t contributed 48% (AUS$133.9 billion) of Australia’s employed workforce engaged in the non-agricultural
total trade. formal sector.
• C ► ompanies belonging to the sector paid US$18 billion • T ► he sector contributes almost 50% of South Africa’s
in state and federal taxes. export earnings.
• T ► he sector continues to be the leading contributor to
the exchequer in terms of taxation.
6 “The Australian Minerals Industry and the Australian Economy – July 2009,” Mineral Councils of Australia website, www.minerals.org.au/__data/assets/pdf_
file/0017/32804/Aus_min_industry_fact_sheet_July_2009.pdf, accessed 24 August 2010

7 “Mining and Minerals in South Africa,” South Africa Info website, www.southafrica.info/business/economy/sectors/mining.htm, accessed 24 August 2010

The Sun rises in the East | 12


03
Brief profile of key
eastern states
13 | The Sun rises in the East
Chhattisgarh Figure 26: GSDP - by sectors (FY09)

Chhattisgarh came into existence on 1 November 2000 after 16.3%


being carved out of Madhya Pradesh. It is the seventh-largest 38.3%
state of the country by area, while in terms of population, it
ranks seventeenth8.

Economic profile
Chhattisgarh’s GSDP totaled INR539 billion during FY09, and
the state recorded average growth of 9.7% between FY05
45.4%
and FY09. Although agriculture is the primary activity in the
state and employs almost 80% of the state’s workforce, rapid SGDP - Services SGDP - Agriculture SGDP - Industry
industrial growth has been the key driver of state growth in the Source: CMIE State Analysis Service
past five years.
The
Exhibit 24: Chhattisgarh's GSDP�(INR billion) GSDP of Chhattisgarh’s mining and quarrying sector reached
539 a value of INR70 billion in FY09, growing at an average of
550 505
452 9.2% over the past five years. During this period, the sector’s
440 384 contribution to the economy decreased partially from a value of
359
330
Exhibit 27: GSDP – Mining (INR billion)
220
110
100 16.0%
0
FY05 FY06 FY07 FY08 FY09 80 14.7% 13.0%
14.3% 12.9%
13.3% 14.5%
Source: CMIE State Analysis Service 60
40
13.0%
20 51.2 56.6 60.2 64.9 70.0
In the past five years, the industry’s contribution to the state’s 0 11.5%
GSDP has increased from 42.2% in FY05 to 45.4% in FY09 FY05 FY06 FY07 FY08 FY09
witnessing average growth of 14.2%. On the other hand, the Mining GSDP % of GSDP
contribution of agriculture — the largest employer — to the GSDP
Source: CMIE State Analysis Service
has decreased from 18.7% in FY05 to 16.3% in FY09.

Figure 25: GSDP - by sectors (FY05)


14.3% in FY05 to a value of 13% in FY09.
18.7%

39.1% Industrial investments in Chhattisgarh


The Industrial Policy 2004-2009, issued by the Government of
Chhattisgarh, envisages maximum value addition to its natural
resources by creating a suitable enabling environment with
a focus on infrastructure while creating ample employment
opportunities9. The policy contains a host of initiatives aimed
at introducing administrative and legal reforms and increasing
42.2%
private-sector participation. The Government of Chhattisgarh
SGDP - Services SGDP - Agriculture SGDP - Industry has also issued the State IT & ITES Policy to attract investments
Source: CMIE State Analysis Service in the services sector.

9 “Industrial Policy (2004-09),” Government of Chhattisgarh website,


8 “Chhattisgarh,” India Yearbook 2010, Publications Division, Ministry http://cg.gov.in/govtpolicy/industrial_policy.htm, accessed 24 August
of Information & Broadcasting, Government of India, p.1,125 2010

The Sun rises in the East | 14


Between 2006 and 2009, Chhattisgarh was the second-most Exhibit 29: Key mineral-producing regions in Chhattisgarh
sought-after state in the country for industrial investment after
Orissa. During the same period, the number of proposals that
Chhattisgarh attracted increased at a CAGR of 10.5%, while Sarguja
the value of proposed investment grew at 6.6%. During 2009,
the state witnessed 293 investment proposals with a proposed
Korba
investment value of INR1.3 trillion.

Exhibit 28: Investment intention summary Chhattisgarh


285 293 Coal
2,500 239 300
Kanker Bauxite
2,000 217 240 Bastar
Number

Iron Ore
INR billion

1,500 180
1,000 120 Dantewada
1,079

1,682

2,219

1,306

500 60
0 0
2006 2007 2008 2009 Source: Ministry of Mines 2009–2010 annual report

Source: Department of Industrial Policy & Promotion

Mineral production in Chhattisgarh


As on 30 September 2009, Chhattisgarh had 115 active MoUs
with a proposed investment of INR1.8 trillion. The key focus During FY09, the total value of minerals produced reached a
areas of most projects have been power, cement, steel and value of INR121.7 billion. Accounting for 9.97% of total national
sponge iron10. The Government of Chhattisgarh recently issued mineral production during FY09, the state ranks third in the
the Industrial Policy 2009–2014, which is expected to further country in terms of the value of minerals produced. Apart from
boost investment in the state. possessing a high share of key mineral reserves, the state
holds a major share in the production of various minerals in the
country. In fact, the state’s index of mineral production (base
Chhattisgarh’s mineral profile 1993–94 = 100) has grown to reach a value of 240.30 in FY09
Key minerals compared with a value of 218.96 in FY08. The total number of
reporting mines in the state during FY09 was 147.
With a diversified geography comprising igneous, sedimentary
and metamorphic terrain, Chhattisgarh hosts almost 20 Chhattisgarh’s share in national production
different varieties of minerals. The state accounts for 38% of Mineral % of production in India
tin ore, 19% of iron ore (hematite), 16% of coal and 11% of
Tin 100%
dolomite reserves in the country. The state is the only region in
Coal 21%
India where tin is produced.
Dolomite 30%
Key minerals in Chhattisgarh Iron ore 14%
Mineral % of reserves in India Source: Ministry of Mines 2009–2010 annual report

Tin ore 38%


Mineral production in Chhattisgarh is dominated by coal, iron
Iron ore (hematite) 19%
ore, dolomite and limestone, which together contribute almost
Coal 16%
99% of the entire value of mineral production.
Dolomite 11%
Diamond 28%
Source: Ministry of Mines 2009–2010 annual report
Chhattisgarh’s mineral policy
The Chhattisgarh State Mineral Policy, 2001 envisages the
establishment of an investor-friendly business environment in
the mining sector to attract both domestic and international
private investors through the following objectives:
10 “List of MoUs – Alive,” Chhattisgarh State Investment Promotion
Board website, http://cg.gov.in/departments/sipb/List%20of%20 • To provide facilities for maximum participation of the state‘s
MoUs%20-%20Alive.pdf, accessed 24 August 2010

15 | The Sun rises in the East


population in minerals-based industries by maintaining In the past five years, the industry’s contribution to the GSDP
transparency to increase revenues from minerals has increased from 43.8% in FY05 to 45.6% in FY09. Following
a similar trend, the contribution of services to GSDP during the
• To develop mineral resources with a priority toward export-
same period increased from 39.8% in FY05 to 42.6% in FY09.
oriented minerals, strategic minerals and base metals
However, the contribution of agriculture declined dramatically
• To attract private and foreign participation or investment in from 16.4% in FY05 to 11.8% in FY09.
high-value minerals (gold, base metals and diamonds) and
Exhibit 31: GSDP by sector (FY05)
energy fuels
16.4%
• To introduce new technologies, equipment and R&D facilities
to increase extraction and improve the quality of mineral
resources and their utilization
39.8%
• To implement the Granite Conservation and Development
Rules, 1999 43.8%
• To formulate measures to check illegal mining and the
pilferage of mineral revenue

• To develop a knowledge base and ensure a sustainable


supply of raw material for mineral-based industries SGDP - Services SGDP - Agriculture SGDP - Industry
established within the state through the State Mining Source: CMIE State Analysis Service
Corporation

Exhibit 32: GSDP by sector (FY09)


Jharkhand
11.8%
The state of Jharkhand came into existence on 15 November
2000 as the 28th state of the Indian union, after being carved
out of Bihar. Agriculture is the primary activity in this mineral- 42.6%
rich state, where almost 20% of land is forested.
45.6%

Economic profile
Jharkhand’s GSDP grew at an average rate of 8.5% between
FY05 and FY09 to reach a value of INR547 billion in FY09.
Sustained growth in industries and services primarily drove this SGDP - Services SGDP - Agriculture SGDP - Industry
growth. Between FY05 and FY09, the industry SGDP grew at
an average rate of 9.3% while the SGDP of the services sector Source: CMIE State Analysis Service
grew at an average rate of 10.3%. On the other hand, during the
same period, agriculture grew considerably slowly at 1.5%.
Exhibit 33: GSDP – Mining (INR billion)
Exhibit 30: SGDP – Jharkand (INR billion) 50 15%
40 10.9% 11.0%
547 30 9.1% 8.7% 10%
550 488 518
422 433 8.3%
440 20 5%
10 46.0 47.6 44.6 44.9 45.2
330
0 0%
220 FY05 FY06 FY07 FY08 FY09
110
0 Mining GSDP % of GSDP
FY05 FY06 FY07 FY08 FY09
Source: CMIE State Analysis Service
Source: CMIE State Analysis Service

The Sun rises in the East | 16


During FY05, the contribution of mining and quarrying to Exhibit 35: Key mineral-producing regions in Jharkhand
the SGDP was 11.4% while in FY09 it decreased to 8.3%. The
segment’s GSDP has grown at an average of 1.8% over the
past five years to reach INR70 million in FY09, However, the
sector’s contribution to the SGDP has been decreasing at an
Dumka
average of 6.0%.
Hazaribagh Dhanbad
Palamau
Bokaro
Industrial investments in Jharkhand
Lohardaga Coal
Jharkhand’s State Industrial Policy 2001 envisages the proper
utilization of the state’s mineral resources to provide a firm Bauxite
launching pad for other industries. Investment intentions in the Iron Ore
state increased between 2006 and 2008 to reach a value of Gumla
West
INR1.4 trillion. Moreover, under the impact of the global financial Singhbhum
crisis, 2009 saw a visible decrease in investment intention.

Exhibit 34: Investment intention summary – Jharkhand


Source: Ministry of Mines 2009–2010 annual report

1,427 300
Mineral production in Jharkhand
1,000 240 The total value of minerals produced in the state reached
823 INR94.4 billion in FY09. With a share of 7.7% in total national
Number

750 795 180


INR billion

500 98 mineral production, the state ranked fourth at the national level.
79 120
74 65 Coal is the major mineral produced in the state, accounting for
250 60
336 nearly 87.4% of the total value of mineral production. The value
0 0
2006 2007 2008 2009 of the state’s index of mineral production (base 1993–94 =
100) has grown over time to reach a value of 130.98 in FY09.
Mining GSDP % of GSDP
The total number of reporting mines in the state during FY09
Source: DIPP was 294.

Chhattisgarh’s rank in national production

Jharkhand’s mineral profile Mineral Rank


Kyanite 1
Key minerals Gold 2
Felspar 3
With reserves of more than 35 minerals, Jharkhand is among the
leading mineral producers in the country. It is endowed with a Graphite 3
Source: Ministry of Mines 2009–2010 annual report
vast variety of minerals, ranging from iron ore, coal, copper ore,
mica and bauxite to kyanite, uranium and sillimanite. The state While during the year the state witnessed increase in production
accounts for 35% of the country’s rock phosphate, 29% of coal of most minerals, there was a decline in the output of limestone,
and 28% of iron ore (hematite). laterite, gold and fireclay due to low market demand and
disruptions by Naxal outfits.
Key minerals in Jharkhand
Mineral % of reserves in India
Jharkhand’s mineral policy
Rock phosphate 35%
Coal 29% The state’s mineral policy has been designed to provide
Iron ore (hematite) 28% incentives to encourage investments. The objectives of the
Apatite 27% policy are as follows:
Andalusite 22% • FDI with special packages should be decided on a case-to-
Copper ore 16% case basis.
Silver 10%
Source: Ministry of Mines 2009–2010 annual report

17 | The Sun rises in the East


• The availability of raw material should be ensured through The services sector has historically been the largest segment
state-run JSMDC. in terms of the GSDP. Between FY05 and FY09, the sector’s
contribution to Orissa’s GDP grew from 47% to 50%. Similar
• Private-sector participation in various aspects of mineral
growth was seen in the industry sector, the contribution of
development should be encouraged through the following:
which grew from 27.5% in FY05 to 29.9% in FY09. However,
• Exploration agriculture’s contribution decreased considerably from 25.5% in
FY05 to 20.0% in FY09.
• Infrastructure development
Exhibit 37: GSDP by sector (FY05)
• Minimum interference or obstacles in the way of project
implementation should be ensured.
25.5%
• Environment-friendly policies should be implemented, along
with transparent policies for investors.

• Dedicated rail and road connections to ports such as Dubri 47.0%


and Paradeep should be established.
27.5%
Orissa
Orissa is located on the northeastern part of the Indian
peninsula, surrounded by the Bay of Bengal on the east. SGDP - Services SGDP - Agriculture SGDP - Industry
Agriculture is the key occupation of almost 65% of the mineral-
Source: CMIE State Analysis Service
rich state’s total workforce, contributing almost 20% of the
SGDP during FY0911. The state is home to a several key
Exhibit 38: GSDP by sector (FY09)
minerals and ores such as bauxite, chromite and nickel ore.
20.0%

Economic profile
Orissa’s SGDP was valued at INR833 billion during FY09.
The state witnessed an average GSDP growth rate of 10.2% 50.1%
between FY05 to FY09. Along lines similar to the trend 29.9%
observed in Jharkhand, the growth in Orissa’s GSDP has been
driven by the industry and services sectors. Between FY05 and
FY09, the industry sector in the state grew at an average of
15.3%, while the services sector grew at an average of 11.3%.
However, agriculture grew at a subdued rate of 2.9% during the SGDP - Services SGDP - Agriculture SGDP - Industry
same period. Source: CMIE State Analysis Service

Figure 36: State Gross Domestic Product (INR billion)


The GSDP of Orissa’s mining and quarrying sector reached a
value of INR54 billion in FY09, having grown at an average rate
900 781 833 of 10.2% since FY05. Despite this growth, the sector’s share
702
582 616 in the GSDP has remained stagnant, declining marginally from
600
6.8% in FY05 to 6.4% in FY09.
300

0
FY05 FY06 FY07 FY08 FY09

Source: CMIE State Analysis Service

11 “Orissa,” India Yearbook 2010, Publications Division, Ministry of


Information & Broadcasting, Government of India, p.1,181

The Sun rises in the East | 18


Exhibit 39: GSDP — Mining (INR billion) Key minerals in Orissa
Mineral % of reserves in India
Chromite 95%
50 9%
6.8% 6.8% 7.2% 6.8% Nickel ore 92%
40 6.4%
6% Cobalt ore 69%
30
Bauxite 55%
20 3% Titaniferous magnetite 51%
10 39.4 41.7 50.6 53.2 53.6 Limestone 40%
0 0% Iron ore (hematite) 33%
FY05 FY06 FY07 FY08 FY09
Source: Ministry of Mines 2009–2010 annual report

Mining GSDP % of GSDP


Exhibit 40: Key mineral-producing regions in Orissa
Source: CMIE State Analysis Service

Industrial investments in Orissa


Since 2008, Orissa has been the leading state in India in terms Jharsaguda Sundergarh Mayurbhanj
of investment intentions. In 2008, proposed investments in Sambhalpur
the state totaled INR2.5 trillion, the highest in the country. Bolangir
However, subsequent to the global financial crisis, 2009 Dhenakanal
witnessed a sharp decrease in proposed investments.
Kalahandi
In its attempt to improve the state’s business climate, the
Government of Orissa has issued a number of policies. These Koraput Coal
include the Industrial Policy 2007, Foreign Direct Investment Bauxite
Policy 2006, Labour Policy 2004 and ICT Plan 2000-2005. The Iron Ore
Government of Orissa also introduced the Orissa Public Private
Partnership Policy 2007 to improve private participation in the
infrastructure sector.
Source: Ministry of Mines 2009–2010 annual report
Over the past few years, the state has witnessed investments
in key sectors such as steel, alumina and power generation.
However, projects such as the POSCO steel plant project have Mineral production in Orissa
been facing inordinate delays due to various procedural and
The total value of minerals produced in India in FY09 was
legal issues that necessitate the further improvement of the
around INR162 billion. Contributing 13.3% of this total value,
business environment.
Orissa ranked first among India’s mineral-producing states.
Coal, bauxite, chromite, iron ore, limestone and manganese ore
Orissa’s mineral profile collectively account for almost 99% of the state’s total value of
Orissa occupies an important position on India’s mineral map, mineral production.
in terms of both resources and production. The state’s mineral
Orissa’s share in national production
deposit is not only vast but also equally diverse. It is one of
Mineral % of production in India
the largest mineral-bearing states in India, representing 16.9%
of the country’s total mineral reserves. The state’s mineral Iron ore 34.4%
deposits include coal, iron-ore, manganese ore, bauxite and Bauxite 30.4%
chromite. Orissa is considered the leading producer of these Chromite 99.9%
minerals across India. The state is also home to the country’s Manganese ore 32.0%
sole reserves of ruby and the platinum group of metals. Coal 19.9%
Graphite 45.0%
Source: Ministry of Mines 2009–2010 annual report

The state’s index of mineral production (base 1993-94 =


100) during FY09 was 426.09, compared with 425.85 in the

19 | The Sun rises in the East


previous year. The total number of mines in operation in the Exhibit 43: GSDP by sector (FY09)
state during the year was 233.
21.3%

West Bengal
West Bengal lies on the eastern boundary of India, separating
the rest of the country from the Northeast States. Agriculture is
58.2% 20.5%
West Bengal’s mainstay, with almost three-fourths of the state’s
population engaged in this industry.

Economic profile
SGDP - Services SGDP - Agriculture SGDP - Industry
Between FY05 and FY09, West Bengal’s GSDP grew at an
average rate of 7.3%. The industry and services sectors were
Source: CMIE State Analysis Service
the prime drivers of growth in the state. The industrial sector
grew at an average rate of 8.7% between FY05 and FY09. The
services segment grew at an average rate of 9.1%. West Bengal’s mining and quarrying GDP during FY09 totaled
INR21.5 billion, having grown at an average rate of 1.2% since
Exhibit 41: SGDP — West Bengal �(INR billion) FY05. The sector’s share of the GDP decreased from 1.3% in
FY05 to 0.9% in FY09.
2,500 2,368
2,227
2,049
2,000 1,777 1,877 Exhibit 44: GSDP — Mining (INR billion)
1,500
1,000 30 1.3% 1.2% 1.1% 2%
0.9% 0.9%
500 1%
20
0 0%
FY05 FY06 FY07 FY08 FY09
10
21.5 - 1%
Source: CMIE State Analysis Service 22.9 22.6 23.3 21.1
0 - 2%
FY05 FY06 FY07 FY08 FY09

The sectoral composition of West Bengal is skewed toward Mining GSDP % of GSDP
services. The sector contributed close to 54.2% to the GSDP Source: CMIE State Analysis Service
during FY05. Moreover, in the past five years, the sector’s
contribution has increased to 58.2% during FY09. The industry
sector’s share of the GSDP grew to 20.5% in FY09 compared Industrial investments in West Bengal
with 19.9% in FY05. On the other hand, the agriculture sector’s
contribution to the GSDP decreased from 25.9% in FY05 to Investment intentions in West Bengal reached a peak proposed
21.3% in FY09. investment value of INR950 billion during 2008. However,
under the impact of the global financial crisis, this value
Figure 42: GSDP - by sectors (FY05) plummeted to INR444 billion in 2009.
25.9%
Exhibit 45: Investment intention summary — West Bengal

296
1,000 226 223 300
800 206 240
Number
INR billion

54.2% 19.9% 600 180


400 120
153 640 950 444
200 60
0 0
2006 2007 2008 2009
Source: Department of Industrial Policy & Promotion
SGDP - Services SGDP - Agriculture SGDP - Industry

Source: CMIE State Analysis Service

The Sun rises in the East | 20


Over the past few years, West Bengal has received various Mineral production in West Bengal
investments, specifically in sectors such as steel and
petrochemicals. The relocation of Tata Motors’ mother plant for Mineral production in West Bengal during FY08 was valued at
the production of its entry-level small car, the Nano, in 2008 an estimated INR32.1 billion. The state accounted for 2.8% of
and related issues of land acquisition appeared to have altered the overall value of mineral production in the country during
perceptions around the state. FY08. In FY09, the total value of mineral production in the state
rose by 3.59%. Coal accounted for almost 95% of the value of
However during 2009, the Central Government approved state mineral production in the same year.
the creation of a Petrochemicals, Chemicals and Petroleum
Industries Region (PCPIR) in the state, which is expected to give Minor minerals, on the other hand, accounted for almost
further impetus to investments in the state. INR1.46 billion of the total minerals produced in the state
during FY08. The number of reporting mines in West Bengal
during the same period was 113, down by 4 compared with the
West Bengal’s mineral profile previous year. The index of mineral production in the state was
Key minerals measured at 134.7 during FY08 compared with 149.3 in the
previous year.
West Bengal has more than 20 mineral reserves, including key
minerals such as coal, apatite, china clay and fireclay. The state
also has some reserves of titanium minerals, copper, barytes, West Bengal’s mineral policy
kyanite and pyrites. West Bengal mineral policy, issued in 2002, focuses on creating
an amiable environment for the development of the state’s
Key minerals in West Bengal
mining industry. Among the policy’s key points are:
Mineral % of reserves in India
• To invite private capital, resources and technology, both
Coal 10.6%
foreign and domestic in mineral exploitation
Apatite 60.6%
China clay 16.2% • To promote greater R&D activity in the mineral industry
Source: Ministry of Mines 2009–2010 annual report
• To minimize the adverse effects of the mining industry on
West Bengal’s mineral wealth is primarily based on its forest, environment and ecology
possession of close to 11% of India’s coal reserves. West • To ensure the proper vigilance and supervision of mining
Bengal’s major coal reserves can be found in Burdwan activities
(Bardhaman), Bankura, Birbhum, Darjeeling, Jalpaiguri and
Purulia. • To create a database of the state’s mineral resources

Exhibit 46: Key mineral producing regions in West Bengal • To develop industry facilitators in specific minerals such as
coal, granite and china clay

Coal

Birbhum
Purulia
Burdwan

Bankura

Source: Ministry of Mines 2009–2010 annual report

21 | The Sun rises in the East


04
The mining industry:
key challenges

The Sun rises in the East | 22


Despite holding tremendous growth potential, the mining Exhibit 47: Mining Approvals Process flow12
industry in India continues to face a number of challenges.
Conflicting interests of various stakeholders have further Initial mining application
District Collector’s office
complicated the regulatory and industry landscape.. While
sustainability is a key factor from the GoI’s perspective, from
the industry’s perspective, greater transparency in policies with Application forwarded
Director of Mining and Geology
respect to MLs and faster decision making is important. Over
the past few years, the GoI has been aggressively attracting
Application forwarded
investments in downstream industries through the grant
State Mining Department
of captive mines. In fact, until 2009, the GoI has permitted
almost 54% of captive mines to the private sector. Moreover,
the GoI is envisaging the introduction of a competitive-bidding Approval of mining plan Approval of mining plan
system for the allocation of captive coal mines. Central Government State Government
(major minerals) (minor minerals)

Procedural delays amid requirements of


Approvals from various bodies
several approvals and clearances State Pollution Control Board – NOC
Ministry of Environment and Forests – Site clearance
Currently, processes that must precede the execution of mining State Forest Department – Forest clearance
leases can be time consuming. According to the Report of Other departments – NOC
the High Level Committee on National Mineral Policy (Hoda
Committee 2006), an application for a PL by an RP holder can Project clearance
run past as many as 80 desks. Moreover, the overall process Ministry of Environment & Forests
of obtaining various clearances takes a minimum of 500 days,
and in most cases, this limit is exceeded. Exhibit 47 details the
Post approval execution
process that is followed to obtain the grant of an ML in India.
State Government

Top strategic global business risks for Source: Hoda Committee Report

the metals and mining industry


Speedy approvals are dependent on various factors,
• C
► apital allocation which jurisdictional and departmental rules and processes
further complicate. In case of an RP, where the area under
• S
► hortage of skills consideration is spread across districts, the filing of applications
• C
► ost management can be a cumbersome affair. Moreover, although there are
timelines for the completion of various activities, concerned
• R
► esource nationalism departments or agencies rarely adhere to them.
• M
► aintenance of a social license to operate Based on the recommendations of the Hoda Committee 2006,
• Access to infrastructure access the GoI envisioned the development of a framework for the
speedy clearance of applications. Moreover, in the draft Mines
• A
► ccess to secure energy and Minerals (Development and Regulation) Act 2010, the
• Access to capital GoI has incorporated certain important structural changes
to decrease the turnaround time associated with mining
• P
► rice and currency volatility concessions. The new law has removed the requirement of prior
• C
► limate change concerns approval from the Central Government, for minerals falling
under Part C of the law’s first schedule, which includes almost
The 2010 Ernst & Young business risk report; Business risks 74 minerals. In effect, under the new law, state governments
facing mining and metals can grant approvals for almost all key minerals, excluding coal,

12 “National Mineral Policy – Report of the High Level Committee,” Planning


Commission, Government of India, Ministry of Mines website, http://mines.nic.in/
writereaddata/Filelinks/46ff58f0_rep_nmp.pdf, accessed 10 August 2010

23 | The Sun rises in the East


lignite and atomic minerals13. In order to expedite approvals the growing trend among mining and geology graduates to opt
of mineral concessions, the Ministry of Mines established the for prominent sectors such as IT.
Central Coordination cum Empowered Committee in 2009,
The National Mineral Policy 2008 also stressed on the need to
comprising members of central ministries along with secretaries
make the mining sector more lucrative to attract and retain
in charge of mining and geology across the country’s states14.
the best talent. Modifying curriculum in academic institutions
to make mining a more attractive career option has also been
Shortfall of skilled labor suggested. Amid such a scenario, it is increasingly clear that
According to the 61st round of the National Sample Survey effective human resource development is a key priority for the
Organization (NSSO), the mining and quarrying industry sector’s growth.
employs 0.7% of India’s total working-age population.
The industry also provides employment to close to 2.8% Logistics
engineers. However, the growth of skilled manpower has not
Another key issue the sector faces is the lack of availability of
been commensurate with expected growth in the sector. The
infrastructure and logistics, which, on many occasions, results
shortage of qualified manpower is such that the GSI, which
in serious cost implications.
requires 300 professionals per year, is able to source only 75
geologists annually. Key requirements of large mining operations include:

Exhibit 48: Percentage employment of engineering • Social infrastructure (Houses and other ancillary
professionals across sectors requirements)

18.4%
• Operational infrastructure (Power and telecommunications)

• Transport infrastructure (Roads, railways and ports)


2.8% 32.0%
Mine operators typically develop social infrastructure. Major
8.7%
industry players also develop and maintain link roads to the
nearest national or state highway or railway station and utilities.
12.4% This is quite similar to the global trend, wherein most leading
mining companies create their own infrastructure such as roads
25.7% and railways.

There are two key enablers that are important vis-à-vis the
Manufacturing Public Administration Real Estate mining industry:
Utilities Mining and quarrying Others
Source: Ernst & Young analysis and NSSO, Ministry of Statistics and
• Institutional support in the development of enabling
Programme Implementation, Government of India infrastructure

• Quality of infrastructure
A meeting of the Forum for Interaction with Academic and
These enablers play a crucial role in determining the cost
Research Bodies, organized by the Ministry of Mines in March
structure of the mining sector and related upstream industries
2010, highlighted the severe shortage of skilled manpower in
such as steel and aluminum.
the Indian mining and geology sector15. The meeting revealed

Roads
13 “Draft Mines and Minerals (Development and Regulation) Act 2010,” Road transportation is pivotal to logistics. Roads account
Ministry of Mines website, http://mines.nic.in/writereaddata/filelinks/ for close to 65% of freight. The surfaced national and state
d02ee72f_noticeapril.pdf, accessed 10 August 2010
highways cumulatively constitute only 2.14% of the total
14 Source: “Recommendations for mining lease,” Lok Sabha press national roadways. Moreover, the National Highways carry
release, http://pib.nic.in/release/release.asp?relid=59675&kwd=, 19 almost 40% of the country’s road traffic. In such a scenario, the
August 2010 importance of roads has increased dramatically16.
15 Source: “Mining sector to create enormous job opportunities,” Press
Information Bureau, Government of India press release, http://pib.nic.
16 “Road network,” National Highway Authority of India website,www.
in/release/release.asp?relid=59388&kwd=, 19 August 2010
nhai.org/roadnetwork.htm, accessed 20 August 2010

The Sun rises in the East | 24


In case of eastern states, due to the quality of the roads, the 2010 was lower by 2.8% compared with that at the end of the
industry faces problems with logistics. Even the Government Tenth Five Year Plan.
of Jharkhand acknowledges that roads that already exist face
bottlenecks such as inadequate road width, poor riding quality, Power scenario in the four eastern states
deficient traffic safety provisions along with various bottlenecks State Capacity at Capacity as Expected energy
that cause congestion.17 end of the on 31 March situation in 2011–12
Tenth Plan 2010 (MW) + Surplus
Availability of roads (MW) - Deficient
Mineral Chhattisgarh Jharkhand Orissa West Jharkhand 1,998.4 1,942.9 -42.8%
Bengal Chhattisgarh 2,060.6 4,769.5 26.2%
National 2,184 1,805 3,704 2,578 Orissa 3,243.9 4,059.3 -0.8%
Highways West Bengal 5,537.8 8,149.5 31.9%
State 3,214 6,880 4,564 3,533 All India 132,329 159,399 -2.0%
Highways Source: Ministry of Power, Government of India
Source: State Public Works and Road Construction Departments and the
With a significant shortfall expected in FY12, the Government
National Highway Authority of India
of Jharkhand needs to take cognizance of the criticality of the
In order to improve the availability and quality of roads in state’s power situation before the state’s comparative
the country, the Central Government, through the National advantage over other states in providing an ideal business
Highway Authority of India (NHAI), has undertaken the National environment is impacted.
Highway Development Project (NHDP). Under the project, the
National Highways are being upgraded and widened. However, Inadequate survey and exploration budget
the program faces challenges on various fronts, due to which
and activity
in 2009, instead of the envisaged construction rate of 20 km/
day, the NHAI was able to achieve a completion rate of only The survey and exploration of minerals is an important part of
13 km/day. the mining value chain. Globally, approximately US$7.32 billion
was spent on the exploration of non-ferrous minerals (excluding
Railways uranium) in 2009. Canada led in this regard, with a share of
16% in overall expenditure. Australia and Peru followed, with
A number of challenges have impacted the prominence of the shares of 13% and 7%, respectively.
country’s railways as a preferred mode of transport. Among the
major problems the industry faces are delays in rake movement, In comparison, the annual budgeted expenditure for the
congestion, lack of multiple access points at plants or mines GSI, the principal agency in India for geological mapping and
and insufficient line capacity. While the Ministry of Railways regional mineral resource assessment, was only INR4 billion
has outlined ambitious targets in its Vision 2020 document, it (US$87 million) for FY09. For a country as large as India, this
remains to be seen how far it is successful in achieving them. expenditure is extremely low. This has been one of the reasons
cited for inadequate survey and exploration activity in India.

Power While geological mapping has been conducted across the


country, India still lags behind in terms of geophysical and
Another crucial factor in the development of mining industry is
geochemical mapping. Geophysical mapping has been
power. The power scenario in the four eastern states presents
conducted for approximately 6.8% out of the total hard rock
an interesting picture. While as of 31 March 2010, Chhattisgarh
area of 1.9 million sq. km. Similarly, geochemical mapping
has added power at an impressive CAGR 131.6% compared with
has been conducted for 5.1% of total eligible landmass of 3.3
power supply at the end of the Tenth Five Year Plan (2007).
million sq. km. For a country such as India, it is essential that
West Bengal and Orissa have also witnessed an encouraging
adequate emphasis is laid on survey and exploration activities.
increase in installed power capacity at CAGRs of 47.2% and
25.1%, respectively. However, installed capacity as on 31 March

17 “Department of Road Construction,” Government of Jharkhand


website, www.jharkhand.gov.in/new_depts/roadc/roadc_fr.html,
accessed 20 August 2010

25 | The Sun rises in the East


Exhibit 49: Exploration budget across countries, 2009 Environmental protection
Sustainable development has been a concern for mining and
16.0% metals companies for the past few decades, and environmental
protection is a fundamental component of their survival.

13.0% For mining and metals companies, operating as part of a society


and host community in an acceptable manner and contributing
53.0%
7.0% to sustainable development are important elements in
maintaining a social license to operate.

6.0%
Mining companies have to adopt constructive measures to
arrive at a situation where they are working in a reduced risk
5.0%
environment to survive in a challenging environment. Following
Canada Australia Peru are the key steps that mining companies should adopt for
United States Russia Others sustainable mining:
Source: “World Exploration Trends,” Metals Economics Group
• Effectively monitoring emissions into the environment from
the mine and adopting steps to reduce them

• Focusing on and intensifying corporate social responsibility


(CSR) initiatives to win the trust of local inhabitants

• Strengthening R&R policies

• Integrating sustainability key performance indicators (KPIs)


with productivity outcomes, e.g., increase in mine safety and
reduction in water consumption and waste

• Linking sustainability outcomes to the attraction and


retention of the workforce

• Encouraging trusting and supportive relationships with all


stakeholders to reduce security risks in troubled locations

• Integrating sustainability objectives into long–term planning

The Sun rises in the East | 26


The road ahead
05
While their diverse mineral wealth holds immense growth While the metals and mining sector continues to witness
potential, the four eastern states of Chhattisgarh, Jharkhand, interplay between various social stakeholders, it is essential that
Orissa and West Bengal have historically not managed to the Government of India (GoI) initiates measures to resolve the
convert this potential into tangible benefits, as it remains key issues that the industry currently faces.
largely untapped. The respective governments of these states
Home to a rich bouquet of minerals and metals, particularly
need to propel economic growth in these regions by leveraging
in its eastern region, India is poised for significant growth in
their mineral-rich deposits, just as several other regions across
this space. Yet, a multitude of factors continue to plague the
the world such as Australia and South Africa have done.
country’s minerals and metals industry, thereby hampering
The time to tap the potential of mineral reserves is ideal, as the growth.
outlook for this industry in India is seemingly bright:

• The domestic demand for metals (and, thus, minerals from Key industry concerns
the eastern states) is poised for significant growth over the • Procedural complications and delays: The process of
next few years, which, in turn, is expected to catapult India acquiring a mining lease (ML) in India is complicated, with
to among the world’s top five markets for minerals and an application for a prospecting lease (PL) having to travel
metals. through more than 80 desks. Moreover, while the GoI has
• The rising global demand for steel, aluminum and coal declared ideal timelines for passing such applications,
has uniquely positioned India due to its inherent low-cost investors face inordinate delays on several occasions. The
advantage. GoI must strive to pass projects in a timely manner so as to
avoid any adverse impact on the economic viability of such
It is estimated that by 2015, Chattisgarh, Jharkhand and Orissa projects.
can aspire to produce close to 130–195 million tonnes of iron
ore, 56–80 million tonnes of steel and 500–650 million tonnes • Shortfall of skilled labor: The Indian mining sector provides
of coal. West Bengal can aspire to produce 80–100 million employment to almost 3% of the country’s engineering
tonnes of coal and expand its current steel capacity. This is workforce. The sector continues to generate demand for
expected to give significant impetus to economic growth in skilled workers with capabilities in mining and geology.
these states. However, with students increasingly opting for more
lucrative sectors such as IT or for higher studies abroad, the
These states are also likely to benefit in terms of employment industry has started to face a skilled manpower shortage.
generation. Levels of employment in the minerals and metals
sector could increase from 560,000 to almost 1.4 million • Logistics: While mining projects typically develop social
workers by 2015. Commercial activity in the sector could also and operational infrastructure independently, they require
increase significantly to reach a value of approximately US$2.9 institutional support for the development of enabling
billion by 2015. infrastructure. Moreover, the quality of infrastructure is
becoming increasingly important, since with the growing

27 | The Sun rises in the East


spread of industrial activity across the country, minerals are • Provide priority status to the sector and set concrete
expected to travel greater distances from the pithead. As mineral policies: Authorities involved in decision making
such, the GoI needs to focus on the continued development need to define clear aspirations for growth and strive to
of key infrastructure such as roads, railways and power to achieve them through proper tracking mechanisms and
support mining activity. benchmarks. The GoI can also introduce progressive mineral
policies and create an environment that is conducive to
• Inadequate survey and exploration: India’s annual allocation
collaboration among the eastern states to harness the
for mineral survey and exploration is extremely low. While
potential of their mineral deposits and develop a unified
Australia spent US$7.3 billion on such activity during 2009,
approach to handling challenges that are commonly
the allocation for the Geological Survey of India (GSI) in FY09
prevalent within the sector.
was US$87 million. For a country as large as India, this is far
from adequate. While geological mapping in India is almost • Strengthen the infrastructure available to the sector: The
complete, it continues to lag behind in terms of geophysical governments of Chhattisgarh, Jharkhand, Orissa and West
and geochemical mapping. Bengal should ensure the availability of proper infrastructure
and logistics to mining companies, so they can operate
Realizing potential: key initiatives in an environment favorable to business growth. Mines
should be well-connected by road and rail to facilitate the
In such a scenario, the GoI, the industry and state governments transportation of raw material and end products and, thus,
must collaborate to showcase the country’s mineral potential reduce lead time and increase production.
globally. In order to fully leverage the potential of the Indian
metals and mining industry, particularly the mineral basket, The respective governments of the eastern states and the
and to overcome the challenges that currently prevail in metals and mining industry need to work collaboratively to allow
the sector, the need of the hour is to focus on certain key the region’s mineral wealth to shine across the globe.
facilitating factors. These include speeding up approval and India’s mineral basket is all set for unprecedented growth due
clearance processes, providing priority status to the industry to their rich mineral reserves. As such, these states should be
and establishing concrete policies to boost sector growth, and supported by policies that attract new projects and encourage
enhancing the availability of infrastructure. sector growth. These regions should also employ dynamic
• Facilitate speedy approvals and clearances for projects strategies to tap the potential of their mineral reserves to
in the sector: The GoI, along with respective state attract business from across the globe. A focused approach
governments, should establish a fast-track clearance to enhancing the infrastructure and commercial appeal of the
mechanism for projects. Mineral-rich regions should be mineral basket can truly catapult India and its eastern states to
converted to special mining areas (SMAs). States should new heights.
be provided with world-class standards for large-scale,
environment-friendly mining.

The Sun rises in the East | 28


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29 | The Sun rises in the East


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