Escolar Documentos
Profissional Documentos
Cultura Documentos
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
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.
16.2%
1 Source: Ministry of Mines 2009–2010 annual report
2001
2002
2003
2004
2005
2006
2007
2,000 1,595
1,500
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
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.
Cement,
Steel,
0.6%
0.7%
5 Source: “India Coal Sector- Fault Lines,” April 2010, via ISI Emerging Markets
Power Steel Cement Fertilizers Others
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
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
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
7 “Mining and Minerals in South Africa,” South Africa Info website, www.southafrica.info/business/economy/sectors/mining.htm, accessed 24 August 2010
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.
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
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
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
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.
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
0
FY05 FY06 FY07 FY08 FY09
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
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
Top strategic global business risks for Source: Hoda Committee Report
Exhibit 48: Percentage employment of engineering • Social infrastructure (Houses and other ancillary
professionals across sectors requirements)
18.4%
• Operational infrastructure (Power and telecommunications)
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
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
• 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
CII offices
Corporate offices Regional offices
Confederation of Indian Industry Confederation of Indian Industry
Assurance | Tax | Transactions | Advisory The Confederation of Indian Industry (CII) works to create and
sustain an environment conducive to the growth of industry in India,
About Ernst & Young partnering industry and government alike through advisory and
Ernst & Young is a global leader in assurance, tax, consultative processes.
transaction and advisory services. Worldwide, our
144,000 people are united by our shared values and CII is a non-government, not-for-profit, industry led and industry
an unwavering commitment to quality. We make a managed organisation, playing a proactive role in India’s
difference by helping our people, our clients and our development process. Founded over 115 years ago, it is India’s
wider communities achieve their potential. premier business association, with a direct membership of over
8100 organisations from the private as well as public sectors,
Ernst & Young refers to the global organization of including SMEs and MNCs, and an indirect membership of over
member firms of Ernst & Young Global Limited, each 90,000 companies from around 400 national and regional sectoral
of which is a separate legal entity. Ernst & Young associations.
Global Limited, a UK company limited by guarantee,
does not provide services to clients. Ernst & Young CII catalyses change by working closely with government on policy
Pvt. Ltd. is one of the Indian client serving member issues, enhancing efficiency, competitiveness and expanding
firms of EYGM Limited. For more information about business opportunities for industry through a range of specialised
our organization, please visit www.ey.com. services and global linkages. It also provides a platform for sectoral
consensus building and networking. Major emphasis is laid on
Ernst & Young Pvt. Ltd. is a company registered under projecting a positive image of business, assisting industry to identify
the Companies Act, 1956 having its registered office at and execute corporate citizenship programmes. Partnerships with
22 Camac Street, 3rd Floor, Block C, Kolkata - 700016 over 120 NGOs across the country carry forward our initiatives
© 2010 Ernst & Young Pvt. Ltd. in integrated and inclusive development, which include health,
All Rights Reserved. education, livelihood, diversity management, skill development and
environment, to name a few.
EYIN1009-094
CII has taken up the agenda of “Business for Livelihood” for the
This publication contains information in summary form and is therefore
year 2010-11. Businesses are part of civil society and creating
intended for general guidance only. It is not intended to be a substitute for
detailed research or the exercise of professional judgment. Neither EYGM livelihoods is the best act of corporate social responsibility. Looking
Limited nor any other member of the global Ernst & Young organization ahead, the focus for 2010-11 would be on the four key Enablers for
can accept any responsibility for loss occasioned to any person acting or
Sustainable Enterprises: Education, Employability, Innovation and
refraining from action as a result of any material in this publication. On
any specific matter, reference should be made to the appropriate advisor. Entrepreneurship. While Education and Employability help create
a qualified and skilled workforce, Innovation and Entrepreneurship
In line with Ernst & Young’s commitment to minimize
50% its impact on the environment, this document has been would drive growth and employment generation.
printed on paper with a high recycled content.
With 64 offices in India, 9 overseas in Australia, Austria, China,
www.ey.com/india France, Germany, Japan, Singapore, UK, and USA, and institutional
Artwork by Ritu Sharma and Jaspal Singh partnerships with 223 counterpart organisations in 90 countries, CII
serves as a reference point for Indian industry and the international
business community.