Mining Slide

To make mining more attractive, the government must ensure clarity in policy and fast action.

Even as the BJP celebrates its wins in the recent assembly polls, there is a new crisis brewing. As per the latest report of Fraser Institute, India has slipped to the 97th spot out of 104 mining countries in the overall Investment Attractiveness Index from its previous ranking of 73 in 2015 (out of 109). India has been placed among the 10 lowest countries along with Afghanistan, Zimbabwe and Mozambique, while China is ranked 54th.

In 2014, Prime Minister Narendra Modi had promised ease of doing business and continued the discourse to date. But the current ranking is an eye-opener as the key reasons behind Indias poor showing include lack of clarity in policy perception, enforcement of existing regulations, inconsistencies and multiple taxes, legal tangles and uncertainty concerning disputed land claims.

Both coal and non-coal segments have witnessed a significant slump. Although domestic coal production increased during the first two years of the current NDA government, growth stalled due to low power demand. To bring in more transparency, the Narendra Modi-led central government amended the Mines and Minerals (Development and Regulation) Act in June 2015, making the reverse auction route mandatory and doing away with states power of discretion. The new method also requires reworking of mining blocks and more comprehensive data - which are not yet available. As a result, over the past 20 months, only 20 mines have been allocated.

It can be easily seen why the mining sector is in such a mess. From double taxation to ore export bans to allegations of underpricing by PSUs, disputes galore, and some cases have gone right up to the apex court. To make reverse bids successful, India also needs a robust database and comprehensive mapping of its land resources. However, the country has only mapped about 6 per cent of its land mass.

Since last year, India has started working on a national geo-scientific data repository to collate all baseline and mineral exploration information generated by various central and state government agencies as well as mineral concession holders and maintain the data in a geospatial database. It is also trying to bring in digital interventions to speed up the process.

The worst-hit in this industry is iron ore mining. After being battered by production caps, environment-related clampdowns, taxes and duties, and export restrictions, the threat of a price ceiling is now looming large. The nationalist government has its own logic--it wants to ensure plentiful and cheaper iron ore supplies to steel manufacturers in a bid to rein in prices of finished products.

This year, however, most of the states are ready to get back into action as they have updated their data and reworked the block sizes. The Ministry of Coal is also ready with its commercial mining policy and infrastructure. So India has to cut the time lag to grant environment and forest clearances while states need to deal with land acquisition. Also, India is one of the heavily taxed mining countries. Against the global average band of 10-15 per cent, it levies more than 15 per cent besides a corporate tax of about 30 per cent. Understandably, there will be a long road ahead to overcome these hurdles.