Chew over this: The mineral sector’s revenue losses is enough to fund the annual cost of transporting subsidised foodgrains as proposed under the Food Security Bill.
In an admission of ineffective management, the government has pegged revenue losses due to inefficient logistics in the mineral sector at Rs 9,000 crore annually. Further, the government expects these losses to go up to Rs 36,000 crore over the next decade if solutions are not put in place.
The finding is part of a report prepared by the mines ministry to assess the bottlenecks in realising the potential of the minerals sector. According to the study, the key areas of improvement include infrastructure of rail, ports and road connectivity, apart from human capital and technology.
| INDUSTRY-WISE INPUT | ||
| Extra cost on logistics Rs cr | % of gross output | |
| Agriculture, forestry & fishing | 49,000-54,000 | 5-6 |
| Mining & quarrying | 9,000 | 5-6 |
| Manufacturing | 76,000-81,000 | 3 |
| Electricity, gas & water | 4,000 | 2-3 |
| Construction | 31,000 | 2-3 |
| Other wholesale and retail trade | 22,000 | 2-3 |
| Total for logistics intensive industries | 201,000 | 3 |
| Source: Mines ministry’s report “Unlocking the Potential in Indian Minerals Sector” | ||
“The logistical inefficiency arises owing to issues like lack of proper coordination with the railways, ports and surface transport ministries. We do not have dedicated railway corridors for ore movement. Availability of rakes is also a problem,” said a senior official of the mines ministry.
Revenue loss due to inefficient logistics in the mineral sector is almost double that of such losses in other sectors. The report also identifies development of key coastal corridors and increasing the capacity of major ports as critical areas.
“Also, roads, which are important for last-mile connectivity, are not designed for heavy loads. Many roads are not connected to national highways, too,” the official said, adding that the ministry is taking up the issue with other government departments.
The eye-opener report throws up information that should be worrisome for policy-makers and bureaucrats in the mining sector.
Contribution of mining to India’s GDP has remained stagnant at 1.2 per cent over the past decade while major mining countries such as Australia, China and Chile have moved far ahead.
India produces 1,123 million tonnes (mt) of minerals worth Rs 2,00,609 crore annually. The sector contributed Rs 110,482 crore to the country’s GDP last year.
“While mineral-rich states in other countries like Australia have used their mineral wealth to propel state GDP higher than the national average, per capita GDP of a majority of mineral-rich states in India is lower than the national average,” the report stated.
The report also points out how the investment in exploration in India — Rs 400 per sq km — is the lowest among all the major mining economies, leading to a stagnant reserve base for minerals.
To add to all this, it takes between five and eight years to get a mining lease in India while it takes a year in Australia, the report added. The mines ministry has assessed that the sector has the potential to add up to Rs 11,25,000 crore to GDP by 2025, including Rs 3,65,000 crore as direct and Rs 7,65,000 crore as indirect contributions.
The sector has the potential to contribute Rs 3,15,000 crore revenue to the government through corporate taxes, royalty and export duty collections over the same period — around 50 per cent of the current combined fiscal deficit of the Centre and state governments.
