Thursday, June 25, 2009

Mining industry: On a growth trail

Highly endowed with vast mineral resources, the minerals and mining industry is a key segment of the Indian economy. The country’s accelerated growth rate warrants a rapid development of the mining sector, on which most of the basic industries in the manufacturing sector depend.

India, one of the leaders in coal and iron ore production, has seen significant growth in mining activity over the last few years. Moreover, on back of growing demand, even amidst global turmoil, India is surely moving ahead with its aggressive mining plans. There can be a deferral in capital investment, but India will continue to witness significant investment in the mining segment.

In 2008-09, the bulk of the value of mineral production, about 80.65 per cent, was confined to seven states, including offshore areas. Offshore areas continued to lead in terms of value and had a share of 17.72 per cent in the national output. Next in order was Orissa with a share of 14.80 per cent, followed by Chhattisgarh (11.36 per cent) and Jharkhand (8.22 per cent).

Coal India alone produced around 403 million tons (MT) in 2008-09. The company had planned to invest over Rs 18,000 crore to produce 520.5 MT of coal during the terminal year of the Eleventh Plan. One of the other most crucial and strategic raw materials for the country, iron ore has attracted major focus and attention. The country produced over 210 MT of iron ore in 2008-09. Considering the steel project expansion in the country, it has been estimated that production will continue to grow at a compounded annual growth rate of 2.1per cent.

There is tremendous activity in the non-ferrous metals segment as well. Major metal companies, including Nalco, Hindustan Zinc and Hindustan Copper, have massive expansion and exploration plans.

Getting mining leases are a pain point of the industry. But those who have got the mines are currently controlling the metal market, be it steel making or aluminum or copper. Steel makers with captive iron ore and coal resources have been able to make profit despite recession.

The Indian national steel policy, apart from steel production, also aims to remove the bottlenecks in the availability of inputs like iron and coal. It wants to enhance iron ore production from the current capacity of 172 MT to 290 MT in 2019-2020.

Well recognizing the importance of this sector, the country has already seen a tremendous growth in investment here. According to the Annual Report of RBI, deployment of gross bank credit to mining and quarrying (including coal) sector has already crossed Rs 10,616 crore as on March 2008 against Rs 2,800 crore as on March 2004.

However, the government must carefully evaluate export options and allot mining leases with great care. If national resources begin to go out of the country, it would affect our growth plans heavily.

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