The Mining Potential of India

July 24, 2023

GS Paper III Indian Economy

Context:

On June 28, the Ministry of Mines announced a list of 30 critical minerals essential for the growth of many sectors in India. Incentivising domestic exploration of these critical minerals is crucial for India’s long-term goal of reaching net-zero by 2070.

Minerals:

These are natural substances with distinctive chemical and physical properties, composition, and atomic structure, which are extracted from the earth by mining, quarrying and pumping.

Importance of Minerals: Minerals have found their use in almost all sectors. Few examples are given below:

Industrial Minerals: The most widely used industrial minerals include limestone, clays, sand, gravel, diatomite, kaolin, bentonite, silica, barite, gypsum, potash, pumice, and talc.
Chemical Industries: Most of the minerals are used in chemical industries due its utilization in the preparation of chemicals, fertilizers, fluxing agent, metallurgical purposes, etc.
Energy Resources: Mineral fuels like coal, petroleum, and natural gas and nuclear energy minerals, are the conventional sources of energy that are essential for generation of power, required by agriculture, industry, transport and other sectors of the economy.
Nutrition: Minerals are vital components of our food and are required by the human body to fulfill a wide variety of functions, such as building materials for our bones, influencing muscle and nerve function, and regulating the body’s water balance.
- Even, they are components of hormones and enzymes and other biologically active compounds.

A series of events- From Past to Present:

Year	Event
1990s	Economic liberalization in India and the introduction of the National Mineral Policy of 1993, paving the way for private investment in mineral exploration by global exploration companies like De Beers, Rio Tinto, and Anglo American Group.
2011	A working group highlights the importance of the First Come First Serve (FCFS) system in encouraging private investment in mineral exploration.
2012	The Supreme Court of India raises concerns about the susceptibility of FCFS method to manipulation and favoritism in natural resource allocation.
2015	The Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) is amended, replacing the FCFS basis of mineral allocation with auctions. The National Mineral Exploration Trust (NMET) is established to incentivize investment in exploration by public and private entities.
2021	The Non-Exclusive Reconnaissance Permit (NERP) is discontinued due to lack of interest and takers.
February 2023	The mines ministry proposes the introduction of Exploration Licenses (ELs) to incentivize deep-seated and critical mineral exploration through auctioning.
Present	Private companies also have access to Composite Licenses (CLs) for limited mineral evidence areas, allowing both exploration and mining operations.

The Statistics that India holds:

Aspect	Data
Employment in Mining Sector	Directly employed: About 11 million people Directly and indirectly employed: About 55 million people
India’s Iron Ore Production (2021)	4th globally
India’s Coal Production (2021)	2nd largest in the world
India’s Combined Aluminium Production (FY21)	2nd largest in the world at 4.1 MT per annum
Projected Increase in Mineral Demand (2023)	Expected to increase by 3% due to expanded electrification and overall economic growth in India
India’s Advantage in Steel and Alumina	Holds a fair advantage in production and conversion costs
Export Opportunities	Strategic location enables export opportunities to develop, especially in fast-developing Asian markets

Challenges Faced by India:

Challenges in Exploring India’s Mining Potential	Data
Regulatory Hurdles	Miner cannot own a mining lease beyond 10 km2 in area for a mineral in a state Limit restricts major companies from participating in auctions
Inadequate Mineral Exploration	Expenditure on exploration for deep-seated minerals (copper, zinc, lead, gold, silver) is abysmally low
Highly Import Dependent	India’s import bill for minerals and metals reached $157 billion in 2021-22 Accounts for about 1/4th of the total imports
Double Taxation	Minerals like iron ore and bauxite face double taxation in the form of royalty on royalty Mineral users pay royalty on royalty, affecting cost competitiveness

Steps to Make Mining in India More Favorable	Data
Incentivising Domestic Exploration	Announce list of 30 critical minerals for growth Required for green technology manufacturing Incentivize domestic exploration for India’s net-zero goal by 2070
Shift in Exploration Models	Shift to ‘exploration investment incentivizing’ model Attract smaller explorers with successful contributions in other countries
Encouraging Private Companies	Allow private participation in mining of critical non-atomic minerals Remove non-fissile minerals from Part B of MMDR Act, 1957 Increase mining efficiency and reduce mineral import bills for India
Introducing an Independent Regulatory Body	Establish independent regulating authority Ensure impartiality and maximize utilization of resources for national benefit

Additional Information:

Deep-Seated Minerals:

An ore deposit formed at an estimated depth of 12,000 ft (3.66 km) or more, at temperatures ranging from 300 to 575 degrees Celsius.
The deposits are commonly tubular or veinlike in form, though some are irregular in shape.
Located in India: Most of the discoveries in India have been by chance or old workings such as lead and zinc in Udaipur (Rajasthan), chromite in Odisha, copper in Malanjkhand (Madhya Pradesh), bauxite in East Coast, gold deposits in Hutti and Bharat Gold mines in Karnataka.

Critical Minerals:

These are minerals that are essential for clean energy, economic development and national security.
These are essential for the advancement of many sectors, including hightech electronics, telecommunications, transport, and defense.
Expert Committee under the Ministry of Mines has identified a set of 30 critical minerals for India.
- These are Antimony, Beryllium, Bismuth, Cobalt, Copper, Gallium, Germanium, Graphite, Hafnium, Indium, Lithium, Molybdenum, Niobium, Nickel, PGE, Phosphorous, Potash, REE, Rhenium, Silicon, Strontium, Tantalum, Tellurium, Tin, Titanium, Tungsten, Vanadium, Zirconium, Selenium and Cadmium.