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Only a transparent delivery system can attract FDI

India’s resource governance system needs to ensure allocation of iron ore resources to all the steel producers, so that effective value addition can happen within the country and India will be less dependent on import of finished steel, AV Amarnath, CEO, Minerals & Metals SBU, Essar Projects, elaborates to Sumantra Das.

Globally, minerals and metals prices have been volatile for some time. How is the Indian mining industry coping?
In general, the less demand for various types of minerals has affected the mining industry globally. It is again related to the demand-supply theory of any product. But in India, especially the iron ore and coal mining sectors are not affected due to the reason of demand requirement. It is rather due to the policy paralysis and poor governance on mineral resource allocation and its management.

For example, while India’s vast iron ore resources are being exported to other geographies like China, Korea and Japan, major steel producing companies in India have very little or no iron ore resources for captive steel production uses. They are procuring the iron ore from the Indian market while few companies are importing. Our resource governance system needs to ensure allocation of iron ore resources to all the steel producers, so that effective value addition can happen within our country and India will be less dependent on import of finished steel. Similar is the case with coal mining sector. Indian coal-based power producing companies are suffering from the coal supply and importing coal mostly from Indonesia to the tune of 100 million tonne (mt) per annum, even though India is bestowed with huge coal resources.

Thus in a nut shell, India being a populous country, has its own internal demand for all kind of commodities and mining industry in general can be revived by ensuring right policy and smooth process for all kinds of statutory clearances for mining blocks.

What are the lessons learnt from the downturn?
Some of the lessons are to adhere to innovations, to improve the bottom line, to execute the projects at a very competitive cost as survival in adverse condition is very important for us.

In the present condition, can the mining industry make a strategic move?
Yes, it is quite possible that the mining industry can make an easy move as there is huge internal demand. Revival of mining industry will also help the exchequer to save huge foreign exchanges and can bring in a trade balance between import and export, thereby the sliding rupee can be checked, leading to control of high inflation.

What are some of the policy changes required?
The requirements can be listed as follows:

  • Recognise the mineral resources requirement of the individual industries;
  • Prioritise the allocation of resources to those industries which is adding value in real terms. Surplus resources can be allocated for export, if any.
  • Provide single-window supports for all kinds of statutory clearances like forest, environment and mining leases etc, in a time-bound manner, so that there is no cost over runs.
  • Ensure allied resources mainly land, water, power and local admin support for smooth take up of the projects.

The surplus metal capacity in the developed economies limits the headroom for any rise in metal prices. Margins have therefore gone upstream in the value chain of the mining and metals industry, which has shifted the spotlight to mineral resources once again. Will India be able to grab this opportunity?
Yes, India can easily grab this opportunity as we are endowed with vast natural resources, highly skilled technical manpower, low labour cost and strong domestic demand.

How far does low investment in exploration and technology upgradation hamper Indian mining sector? What is your experience?
Indian mining sector is not so organised; even today majority of the mining operations are limited to small scale sizes, inhibiting the use of large size equipment. Organised players are doing well and using the latest technology/equipment for optimal performance. Exploration plays a major role by which potential resources can be mapped and large scale mining operation plan for long term production can be planned with due care to our sensitive ecology and environment. High investment for exploration has been an issue in Indian mining industry and can be achieved through strong governance in place, so that irregular and unsystematic mining can be avoided and an effective mineral conservation can be achieved in the larger interest of the nation.

Why does the mining sector remain unattractive for foreign investors?
It is basically due to poor delivery to the investor by our system. Any investor would like to stick to its budget and timeline within the scope of its project feasibility. If our governance will not take its responsibility to provide the support in terms of resource allocation, statutory clearances, land allocations and unwanted resistances from local populace, then investor including the foreign direct investment (FDI) would never like to invest here. We have to set a transparent delivery system to attract FDI into the mining sector.

How far Indian companies like Essar find mining opportunities globally? What is your current mining portfolio (both domestic and overseas)?
Essar has few mineral assets both in India and overseas locations, which are basically for captive requirements for Essar’s steel and power plants. We have mining assets in Indonesia, the US and Zimbabwe in addition to India.

Do you think mining from overseas a cost-effective proposition to your business?
In general, mining in overseas countries is always a costly affair if one will compare on unit basis with India; as I said, India is still cheaper for its various input costs.

Do you foresee a consolidation in Indian mining sector too?
Yes, it is now going to be more consolidated as authorities have felt to curb the import of many minerals, especially coal. Policy formulation is undergoing in this direction.

Is tackling social issues in mining areas affecting the sector?
Yes, it is affecting to a large extent and need to be addressed with all the stake holders with an integrated approach.

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