The Indian mining industry is in urgent need for a few lifesavers, observes Devarajan Mahadevan.
All stakeholders agree that India's mining industry is in the doldrums, to say the least. And the single-biggest reform that's urgently required, the government-assisted turnaround of Coal India Ltd. (CIL), has been put on the back-burner by the current political dispensation, much to the overall detriment of the mining industry.
Back in 2012, the Comptroller and Auditor General of India (CAG) slammed the government's coal block allocation policy. CAG alleged that the exchequer had lost Rs 1.86 lakh crore because the government had not auctioned 194 coal blocks between 2004 and 2011. Last year, the Standing Committee on Coal and Steel tabled its report in Parliament, which said that allocations between 1993 and 2004 were done without the release of advertisements or information to the public.
The response of the government has been to fall back on CIL to address the country's coal mining woes. By all accounts, the public sector coal behemoth is not up to the task. Though India possesses the fifth-largest reserves of coal, imports of the commodity have been going up. According to reports, India's imports shot up 20 per cent in April-October 2013 from a year earlier, to 105.80 million tonnes.
The appointment of the coal regulator (an entity without teeth in its current avatar) is not likely to change the scenario. The regulator will not fix prices, but will depend on CIL for establishing market rates.
What the industry needs is not another bureaucratic entity, but the freeing up of the sector from government interference. An archaic law like the Coal Mines (Nationalisation) Act, 1973 is still in the statute books. Though an amendment in 1993 to this ancient legislation allowed the entry of private players for mining coal (for captive consumption in power plants), environmental clearance and land acquisition continue to be major problems. Just 30 mines could start production against a targeted 76 mines.
What can be done?
A change in approach
Rather than classify mining as a core industrial activity, the powers that be now consider mining to be an ancillary (raw material) activity. This line of thinking has to change. A FICCI report says that the mining industry's contribution to the country's GDP has been steadily falling. The sector contributed 3.4 per cent of India's GDP in 1992-93. This figure came down to 3 per cent in 1999-2000 and 2.3 per cent in 2009-10. In 2012-13, the contribution of the mining sector was 2 per cent. This is certainly a worrying trend. The measures suggested in this space would certainly go a long way in reviving the prospects of this sector.
General remedial measures to revive the mining industry