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Updated: November 9, 2011 05:07 IST

Talking Business: China's hunger fuelled illegal mining boom

Ananth Krishnan
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S. Vijay Kumar
S. Vijay Kumar

New Mines Bill will ensure tighter regulation, profit sharing

Last year, India shipped around ten million tonnes of iron ore to China, every month. China's growing appetite for raw materials has had a transformative impact on the world's commodity markets. In India, its hunger for iron ore has made millionaires. Some of them, as the illegal mining scam in Bellary, Karnataka has suggested, have gotten rich quick by taking advantage of soaring prices, lax regulation and the rights of local communities.

As the mining industry grew unchecked to cater to Chinese demand, regulatory systems were left “overstretched and at breaking point,” admits Mines Secretary S. Vijay Kumar.

In September, the Union Cabinet approved a landmark Mines and Mineral Development and Regulation (MMDR) Bill, which mandates greater profit-sharing to benefit project-affected communities and tighter regulation.

In an interview with Ananth Krishnan during a visit to China early this week, Mr.Vijay Kumar argued that the bill would clamp down on illegal mining but at the same time promote investment and exploration. He also spoke about the dramatic impact China's growth has had on India's mining industry. Excerpts.

The new mining bill will put in place a tighter regulatory framework to clamp down on illegal mining. But does the Ministry of Mines have the capacity to enforce rules on the ground, considering, as Karnataka has illustrated, how widespread and entrenched the problem of illegal mining is?

You are absolutely right in that the current regime of mining is bedevilled by regulatory practices which have not been able to keep pace with the expansion of mining consequent on Chinese demand.

Production increased rapidly between 2004 and 2010, but the regulatory capacity did not increase. Therefore, the regulatory systems are overstretched and at breaking point.

In the new act, we are proposing to have two independent regulatory systems. One independent regulatory system would be in the form of a mining regulatory authority, which would be responsible for general good governance and standards.

It would be equally applicable to those who are doing mining, or those who are doing exploration, and so on. The other would be a mining tribunal.

The mining tribunal, unlike a regulatory authority, would be quasi-judicial, where only people who are aggrieved by a decision would be able to go. In one sense, it is like a court, but it is a specialised court meant only for mining-related matters, so it is within the ministry as a quasi-judicial authority. It would look at two types of issues.

One is if there are delays in decision-making. The other is if the decision-making in content is in some way erroneous or wrong. Mining tribunals would have the ability to look at the decision and either uphold it if it is right, or quash it if it is wrong.

According to reports, we have had more than 10,000 cases of illegal mining in the past decade alone. Is it possible to address and resolve them all considering the scale of the problem?

Right now, within our ministry, we have quasi-judicial cases which are being looked at. It is being done by the ministry's own officers.

The idea is that instead of the ministry's own officers doing it [an independent authority now will], because in one sense it is not really an independent process as they were participating in the decision-making. For the same ministry which participated in decision-making to also then sit on judgment over the same decisions seems a little anomalous, so we are actually changing it and saying that we will get a third party, an independent authority.

India's exports of iron ore have driven trade with China this past decade, and in some ways have defined the larger trade relationship. Some companies have complained that the taxation structure under the new mining bill is much higher than in a number of countries, including Brazil and China itself. Will the tax derail trade with China and make exports less competitive?

I don't believe that iron ore exports have defined our trade relationship. It is, of course, one of the items of export.

There is a commonality here which was a natural commonality because China could use certain grades of iron ore, whereas we were not using those grades because we did not have the pelletisation capacity. Our sintering capacity was already completely used up by domestic supplies.

Therefore we needed to export, they needed to import. And that is how that trade developed. As we go forward and our own capacity to use iron ore increases, because the new steel policy that is on the anvil is likely to project production of around 200 million tonnes per year of steel by 2020, obviously our export surplus will dwindle to that extent. What we really need to do is to find ways of ensuring that we add value to our minerals. In value-added form, we could continue an export relationship. We would be quite happy with that.

I don't think it is proper to compare taxation regimes of the two countries [India and China]. It is only in relation to the finished product that you can compare, or in relation to the export prices. In case of iron ore, certainly whatever the tax rate may be, the fact remains that it is still quite remunerative and profitable for miners to export iron ore. The fact that the tax rate is still a certain level in no way disincentivises exports.

I think there is more than sufficient margin for the miner today to export, though of course you are right that there is an export duty that has been imposed on both lumps and fines. But that is more to mop up surplus. We believe it is possible for an intelligent miner to still make a lot of money.

What interest have you had from China during your visit here this week, either in directly investing or in cooperating on exploration projects and sharing technology?

We said we are very happy. BEML has now come here [to launch sales of mining equipment].

This is a great opportunity and we see this as part of a larger framework of closer cooperation in mining and mining-technology related subjects with China. Both India and China are growing economies with increasing use of raw materials. This requires both countries to do more and more surveys, more and more exploration, more and more mining.

The Chinese Vice Minister [of Land and Resources, Wang Min] and I agreed there is scope for collaboration in survey and mapping, geophysics and geochemistry, in value-addition including pelletisation.

I suggested pelletisation is one area in which China has some technological knowhow that would be very welcome in India.

He welcomed this suggestion. But we also said we welcome Chinese investments in India, particularly in mining equipment technologies. We do realise it is a two-way process.

The new mining bill has also introduced new rules on profit-sharing, for 26 per cent to go to project-affected local communities. Some have said this isn't enough, while industry groups, like CII and FICCI, have said they are worried this will deter investment.

I had a meeting with the Bank of Montreal. [A representative of the bank] says with these reforms, definitely foreign capital, particularly exploration companies, will come in droves.

The reason is firstly, the new act makes the grant of concessions much simpler and quicker. It makes it more transparent.

It also allows licenses to be freely traded. So a late-stage exploration company can buy up a licensee who has spent time acquiring the license. It will incentivise more venture capital flow into the sector. We expect that mining activity will increase massively over time.

I doubt India benefited at all from all this mass migration of it's iron ore Apart from the scarred landscapes it received a pittance in taxes as most of the profits are probably stashed away in Swiss Banks. China on the other hand has been able to build defense aircraft, military ships and guns and ammunition with our ore to eventually use them against us! There are just too many traitors of our dear country India and one wonders where all this bleeding of our nation will lead to as the culprits always seem to manage to get off the hook. Not only that they also get glamorized by our media who don't hesitate to beam these horrid faces at us day in and day out.

from:  Angela Alvares
Posted on: Nov 24, 2011 at 11:21 IST

1st app-on why take out more iron-ore than its needed?
It will just destroys our natural wealth more & much faster.
Use only what is needed and store the rest for future.

from:  Prashant
Posted on: Nov 22, 2011 at 15:56 IST

The title of the interview 'China's hunger fuelled illegal mining boom' is very misleading. One cannot blame China's hunger for minerals for the lack of accountablity and regulatory norms in mining and export within India.It should have been the 'Conniving politicians fuelled illegal mining boom'.

from:  Saurabh Jha
Posted on: Nov 18, 2011 at 11:51 IST

If only we had knowledgable politicians in the centre who is keen to look at our natural resources !!! This all has to do with policy making. we are sitting on a huge wealth of natural resource and we could use them efficiently without harming nature for the progress of India (as a whole nation and not for the growth of individual pockets) !!!

from:  Joseph
Posted on: Nov 16, 2011 at 09:18 IST

There should be total ban on iron ore export. We must encourage setting up of giant steel plants in our country, to use the iron ore resources here. In addition it will generate employment. Natural resources are the property of the people and this loot by politicians and officers should be punishable by death.

from:  Dr s s Rao
Posted on: Nov 11, 2011 at 06:36 IST

It is known to all that mining is and has been a forte of mafias in India and nobody can penetrate these tightly run ships. Rules like the new MMDR may only touch the tip of the iceberg. As long as the Nation's coffers swell, illegal mining is a bitter pill that has to be swallowed. What I cannot understand is that in a thievery environment there should not be a gold rush in India? At the current price of Rs 3000/- per gram, even a grade of 1gm/ton could be mined in several parts of India. The Government should actively encourage gold mining so that the nation prospers, never mind the ubiquitous mafia.

from:  R.Krishnan
Posted on: Nov 9, 2011 at 22:07 IST

The best way to stop illegal mining AND THE RESULTANT CORRUPTION and political clout is to confiscate the disproportionate assets of the guilty.Why should India disregard the interests of the tribals, environment and posterity in the name of China's greed?

from:  J.Ravindranath
Posted on: Nov 9, 2011 at 17:36 IST

Why are these bills so lately introduced, when so much of our country's wealth are taken away "illegally". No-one seems to be really noticing when there is a suspicious rise of a person or a company. It is only after years that they initially doubt, then forcefully investigate it (by the pressure of media) and then put a bill to correct it. By that time, the people involved in these activities mature or grow enough (politically, financially and what not) to tackle any block placed in front of them.

from:  Rajesh
Posted on: Nov 9, 2011 at 15:48 IST

India's priceless mineral resources have been recklessly plundered for the past decade in a daring fashion by the elected governments itself.Its time to bring a blanket ban on exporting minerals from India, failing which our country will have irreversible ecological disaster. Greedy politicians in India have no ethics,when it comes of making money. BJP party swindled the minerals with an indirect help of Congress, who despite knowing how damaging it is for India's forests and water resources. We dont need any tech knowhow from any country for now, since it will create more swindlers to plunder mother earth.

from:  Syed Kabeer Ahmed
Posted on: Nov 9, 2011 at 14:41 IST

Never export raw materials out of India.Preserve for our next generations in India.If need be let us export only the value added commercially viable manufactured goods so that in the process employment and skills would be made available to locals and communities also bring in values to national exchequer.
There must be a ban on exports of minerals and raw materials since over a period of time no country more so fast developing countries would refrain from exporting their mineral wealths and at that time India like inundated the forest wealth would have outstripped the mineral wealth too leaving our future generations go abegging for minerals.

from:  M L V Pathy
Posted on: Nov 9, 2011 at 14:38 IST

65 years since independence still we cant make steel??? & continue exporting priceless natural resources at cheap rates while bulldozing our tribals?? It looks like dog-eats-dog Indian business culture.

from:  Shaleen Mathur
Posted on: Nov 9, 2011 at 14:02 IST

Natural mineral sources are a very important asset for any country which has to be secured and used very cautiously. It is the base on which we are supposed to build our country and generate employment. It is our duty to use our natural resources in such a way that a sustainable growth is achieved. Once it is illegally transimtted to outside country, the lost wealth won't come back how many ever tribunals or mechanisms we have. Ideally, the complete Value addition on the mineral resources should be ensured to happen within the borders of our country. Else, it is as good as Indian State doing the job of East India Company !! .. Hope our leaders realise this and think for the greater good of their Mother Land rather than going for short term selfish financial gains.

from:  Aleen
Posted on: Nov 9, 2011 at 11:04 IST

India must export Iron ore and minerals to Pakistan also.

from:  IND
Posted on: Nov 9, 2011 at 10:02 IST

Mining is the single source of the biggest root cause of corruption. The policy of exporting raw materials has been easy method of the loot of the wealth of India, only by preserving the raw material and processing them , would have produced million of jobs and today India would not be a backward country, had this been set as a priority. The raw materials were exported below the price of the labour costs earlier. To justify this policy is to serve the nexus of the criminal politicians and the the plunderer of the National wealth.

from:  Bipin
Posted on: Nov 9, 2011 at 06:03 IST
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