The Indian mining industry has the potential to transform dreams into reality and catapult India as a US$ 5 trillion economy but is instead struggling to survive – in the midst of a huge man-made storm.
Mining ranks 3rd largest in terms of employment generation– after construction and real restate. It can create 13 times more employment than agriculture and 6 times more employment than manufacturing particularly in the backward areas with a limited scope for most other economic activities.
The mining sector can provide direct employment to about 48 lakh persons and indirectly create 5 crore more jobs by the year 2025.
But that is where the nightmare begins.
The result is that inspite of being blessed with rich mineral resources and favorable geological conditions; India is heavily dependent on imports of minerals– almost seven times higher than the domestic production.
Over the last 7-8 years the mining sector has been experiencing massive job losses due to bans and restrictions on mining activities.
Ironically though exploration is the lifeline of mining, government exploration agencies with limited expertise, technology and infrastructure dominate the scenario while private sector has hardly any role to play in exploration.
Given an opportunity, the resource-rich private sector – ‘junior exploration companies’ with state-of-the-art technologies and funds — can play a crucial role in furthering the exploration activities. These companies can raise funds for investment from stock exchanges- therefore there is no risk of spending tax payers’ money on risky exploration.
In some other countries the junior exploration companies bring in their own technology and funds on a First-come-First Served (FCFS) basis. However because of the regulatory regime in India, there are many procedural bottlenecks and inordinate delays which take up to 2-3 years to resume operations after successful auction. This disrupts the supplies of raw materials and adversely affects the production process of core industries. As a result a number of mines in Karnataka, Odisha and Goa are experiencing massive job losses.
The mining industry in India is the highest taxed in the world with an effective tax rate of 58% for existing mines and 54% for new mines granted through auction – despite the recent relaxation in corporate tax. These taxes include corporate tax, CSR, dividend distribution tax, royalty, District Mineral Fund (DMF) and National Mineral Exploration Trust (NMET).
In the present scenario it takes 3-5 years for getting environmental clearance (EC) and forest clearance (FC) for grant of mineral concessions. Some of the other bottlenecks for grant of mining lease include acquisition of land. To hasten the process of grant of concessions and operationalization of mines there is a need for in principle approval and statutory clearances like EC and FC and land acquisition before auctioning the mineral block.
Another anomaly is with regard to computation of royalty on minerals based on average monthly sale price published by the IBM which besides royalty also includes DMF and NMET components leading to double taxation.
