Business Today

Time to usher in mining reforms

Only a sustainable policy on use of natural resources can unlock India's full potential.
TV Narendran | Print Edition: Jan 4, 2015
Time to usher in mining reforms
(Illustration: Raj Verma)

T.V. Narendra, MD of Tata Steel for India and South Asia
T.V. Narendra, MD of Tata Steel for India and South Asia
Mineral resources play a vital role in shaping the modern, civilised industrial world. It is important for countries to plan for sustainable use of natural resources so that its use is optimised to match the growth trajectory. India is unique because it is arguably the only country in the world rich in natural resources and big in its market potential. Bridging the richness of our resources with the potential of our markets will help in creating jobs and help cut our dependence on imports. The irony of this is accentuated by our current import bill for coal and iron ore despite having some of the largest resources of these minerals in the world.

India needs to accurately map its reserves through efficient exploration techniques. Regional exploration has been undertaken only at eight per cent to 13 per cent of areas in India, far below compared to mining behemoths like Australia. Exploration budgets for key minerals in India need to be on a par with global exploration budgets. Investment in exploration, accurate mapping of reserves, and free availability of this data are essential for effective and transparent management of mineral resources.

To create more jobs and leverage the availability of raw materials, value-add industries like steel, power, aluminum and so on should get preferential allotment of the key minerals. Given the high cost of capital in India and the need to compete with the best in the world, it is important that the industry at least gets the advantage of having locally available raw materials. The process can be transparent but the companies who are willing to invest or have invested in value addition and downstream industries should get an edge over those who are merchant miners.

Otherwise, everyone in the value chain will be tempted to limit their presence to mining. It is also important to ensure that the cost of owning raw material does not become so prohibitive that it becomes economically viable to import raw materials rather than mine it.

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Here the danger we face currently is expecting that the abnormal profits that many companies made in the commodity business over the last 10 years is here to stay. If one were to look at the commodity prices over the last 100 years or so, one would realise that the spike in the prices over the last 10 years is unlikely to be repeated as there is no other country that will grow as fast as China did over such a short period of time.

The challenge for the industry is to deal with multiple laws and its interpretations and multiple ministries at the Centre and in the states. In addition, the judicial engagement and engagement with the civil society is high. Many in extractive industries have also not been the epitome of responsible behaviour and so are widely mistrusted by the society at large.

So there is a need to build the trust between different sections of the society. There is also a need for simpler and less ambiguous laws with an eye on long-term interests. The government needs to help create a single-window for clearances.

It is imperative that the government recognises the conditions, success factors and strategies to maximise the contribution of the minerals sector to the development of the country. There are a few immediate targets for the government and the industry to spur growth in the sector:

>> Crafting a competitive policy regulatory environment for the ease of doing business

>> Improving existing governance and management systems

>> Opening up opportunities for industry, with a quicker turnaround on investment decisions

>> Promoting active linkages between the minerals sector and other sectors

>> Enabling the creation of knowledge and competencies for industry and communities to grow and develop further

To reform the mining industry, a unified effort must be made by the government, planners, policy-makers, mining industry, technology and service providers and host communities. Through good governance and responsible leadership, India will be able to address some of the critical issues that plague the mining industry.

TV Narendran is the Managing Director of Tata Steel for India and South Asia. A company lifer - he has spent more than 25 years at the steelmaker -Narendran is credited with integrating and turning around NatSteel Holdings, an early Tata Steel overseas acquisition in Singapore.

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