Bright future for mining in India

Known more for mineral consumption than production, particularly in the case of gold, India is nonetheless becoming increasingly attractive to explorers, according to Kumara Rachamalla, president of Mahira Corp. and a financial advisor with Augen Capital.

In his paper The Role of the Mining Sector in the Indian Economy — Infrastructure Issues, Rachamalla states that “the infrastructure sectors in India are poised for a giant step forward.”

Structural reforms, deregulation and liberalization policies, she explains, are paving the way for sustainable economic growth and investment opportunities in mining and other infrastructure industries. In addition, the nation’s foreign direct investment approval policy has been streamlined and simplified, such that approvals of up to 100% participation are possible and approvals of 50-74% participation in projects in mining and other sectors can be granted automatically by the Reserve Bank of India.

The National Mineral Policy of 1993 got the ball rolling by dispensing with the predominant (and, in some cases, exclusive) role of the state in exploring and exploiting the 13 minerals of basic and strategic importance for India: gold, diamonds, copper, lead, zinc, nickel, molybdenum, tungsten, platinum group metals, iron, manganese, sulphur and chromite. The new policy encourages foreign participation in exploration and mining for high-value and scarce minerals, in particular.

In 1996, the Indian government approved a set of guidelines that built on the 1993 mineral policy reforms.

Having given the central government most of the authority over the sector, the Indian Constitution ensures that mineral laws are uniform throughout the country. A notable exception is the right to grant mineral concessions, which rests with the state governments.

The total value of imported minerals and metals in 1995-96 accounted for US$9.6 billion, while the value of mineral exports was US$7.2 billion. The need to correct this imbalance has prompted the Indian government to encourage exploration and development of the country’s mineral resources.

Although it is the world’s largest consumer of gold, India is a relatively modest producer, and production is expected to decline to 1.5 tonnes by 2002 from 2 tonnes in 1996 and 8 tonnes in the better days of 1950. Similarly, India imports more than 70% of the world output of rough diamonds, yet produces only 32,000 carats a year domestically. Less extreme imbalances can be seen in copper, zinc and lead supply and demand.

Rachamalla asserts that, through the use of modern technology, potential exists for the discovery of large mineral deposits in India. A number of majors, including Great Britain’s Rio Tinto, South Africa’s De Beers Consolidated Mines and Australia’s Ashton Mining, have been granted foreign investment approvals on Indian projects in recent years.

“It is hoped that Canadian and American mining companies, so often in the vanguard of overseas exploration and mining, will catch up on this opportunity,” Rachamalla says, citing as a hopeful sign recent Indian ventures initiated by Falconbridge, Continental Resources and Meridian Peak Resources.