India needs to adopt a strategic vision and long-term planning to address key issues of securing certain minerals, which are essential to build the economy, global consultancy firm, Ernst & Young (E&Y)said in a report on mining. The country also need to make higher allocation of funds for mineral exploration and increase exploitable resources, it said in a report titled “Exploring India - Mining the opportunities”. The report was released at the annual conference of the Federation of Indian Mineral Industries (FIMI), here on Monday.
“The balance of economic power is shifting toward mine owners, enhancing their ability to generate higher margins, at least in the current times, making them even stronger. In this environment, harvesting its own mineral resources makes much economic sense for India,” the report said. With technological advancement, several minerals find their usage in high-tech sectors, which have become indispensable in a modern economy. Securing certain minerals will be of critical importance for the development of the industry or of strategic competitive advantage to build the economy, it said.
“India is well endowed with several mineral resources with high global shares. However, much of that has remained unexplored or undiscovered due to various reasons or challenges over decades. The time has come to move fast forward and leverage the opportunity of a high economic cycle and rising domestic demand to put some resources to enhance the pipeline of mineral resources,” the report added.
The E&Y has made some recommendations to the government to utilise mining resources in a better manner for the economic development of the country. It said special mining regions should be identified post the assessment of sustainable regional capacity, resource and infrastructure planning, as well as impact assessment (both environment and social).
SPVs can be created for each potential large mining project and all clearances duly obtained before handing over for development.
Anjani Agrawal, Partner and National Leader, Metals & Mining, Ernst & Young India, said: “Limited resources for exploration activity and relatively complex mining policy environment have constrained the survey and exploration activities.
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India is largely unexplored and, therefore, it offers good opportunities for mining exploration and development companies to be a part of the Indian growth story for the next decade.”
The mining exploration model in the country needs to be changed. For decades, Geological Survey of India (GSI) has been the only agency in India, looking into exploration issues at the national level.
As a result, India has still now explored only 2-3 per cent of the mineral reserves as against almost 100 per cent geophysical and geochemical surveys in countries such as Australia.
Basically, the central government and the respective state governments in India have different legislature and policies to deal with different minerals. It is time for state governments to pro-actively plan and equip themselves with technologies to establish the mineral reserves in their respective states, the report said.
There is an urgent need to increase the funds allocated to Indian exploration agencies such as GSI and Mineral Exploration Corporation Limited (MECL).
An investment of $1 in exploration is estimated to give a return of around $15. While in Canada, more than $2 billion was invested for mineral exploration during 2010, the corresponding figure for India was less than $2 million.
The increase in budget will help these agencies to strengthen their exploration base, which will bring more reserves into the public domain, further boosting investment in the extraction sector in India.
E&Y’s other recommendations include frequent assessment of mining reserves, establishment of a local risk capital market in India for funding greenfield exploration to unlock the untapped potential of the country’s vast natural resources, promotion of contract mining, mineral taxation reforms among others.