Challenges to the mining industry

INDIA IS fairly rich in mineral resources. According to the Ministry of Mines website, the country ranks first in the world in the production of mica blocks and splittings, third in chromite, lignite, coal and barytes, fourth in iron ore and sixth in bauxite and manganese ore. The downside is that the growth in mineral production has been marginal in the last few years rising from Rs. 450 billion in 1997-98 to just Rs. 619 billion in 2002-03. In fact, fuel minerals (coal, lignite, petroleum and natural gas) accounted for most of the growth and constitute almost 80 per cent of the total value of mineral production today.

This is a disturbing portend, considering that with industrial production poised for a new high, the demand for minerals is bound to go up. Significantly, the import of ores and minerals shot up from Rs. 400 billion in 2000-01 to Rs. 700 billion in 2001-02, exceeding for the first time the total value of domestic mineral production.

Mining and quarrying have been age-old practices in India, as evidenced by the profuse use of a variety of stones in the thousands of ancient temples and monuments scattered all over the country and centuries-old digs for ores of iron, zinc, copper and gold ore in Orissa, Rajasthan, Bihar, Mahrashtra, Andhra Pradesh and Karnataka.

However, it was with the push towards industrialisation, after Independence, that substantial investment was made in modern mining practices such as large scale exploitation, mechanisation, benefeciation, transportation, etc. Much of this change was ushered in by the public sector as a consequence of restrictions on private sector investment in mining enforced by the Government in the first four decades after Independence. The public sector still contributes over 80 per cent of the country's production of minerals.

This policy has been gradually jettisoned in the last 10 years after the introduction of economic liberalisation in 1991. We are now seeing private sector initiatives and even foreign investment in major mining projects for winning iron ore, coal, gold, bauxite (an ore of aluminium), diamonds and, of late, petroleum and natural gas. But despite the lifting of restrictions on the participation of the private sector and foreign investment, the mining sector in India still faces some formidable hurdles.

One is the poor quality of available ore deposits of certain minerals such as gold, copper and metallurgical coking coal. When India had high tariff walls and severe import restrictions, digging up very lean ores at great cost could be viable. Today, with metal companies being freely permitted to import rich ores at low tariffs, mining these lean ores makes little economic sense. In fact, the private sector copper producers in the country are now importing their concentrates and the Government-owned Hindustan Copper, which mines its own rather poor ores, is in trouble. Bharat Gold Mines Ltd. at Kolar had to be closed down since the assay of the ore it brought up from miles below ground was so poor that the company was no longer viable. Coal India is losing heavily on extracting low grade metallurgical coking coal from its underground mines and the steel industry has turned to importing most of its metallurgical coke requirements.

A way out of this impasse is to discover fresh richer deposits using sophisticated exploration methods, like Australia Indian Resources Pvt. Ltd. of Perth is planning to do with respect to gold and zinc ores in peninsular India. Another approach is to try novel, low-cost benefeciation technologies on as-mined lean ores, such as the experiment with bio-leaching of copper ore by Hindustan Copper at its Madhya Pradesh mines. Yet another track is to deploy high productivity extraction techniques, such as the use of the long-wall method in some of its underground mines by Coal India, though this has not been very successful due to the highly fractured nature of coal seams in India. The Kudremukh Iron Ore Company Ltd. (KIOCL) has been a shining example of success in exploiting very lean iron ore deposits at a profit by employing a combination of sophisticated mine planning, mechanised open cast mining on a large scale, an automated benefeciation plant and a pipeline-based slurry transport system to the export port to save on freight costs.

The fact that such an efficient mining company may have to soon close down operations leads us to another major challenge facing the Indian mining sector. This is the fact that many rich mineral deposits are in environmentally sensitive areas such as forests, seashores and tribal habitations. In earlier years, the ecological factor never came up for any serious consideration when embarking on a mining operation.

However, now we have judicial pronouncements forbidding mining activity in reserve forests, NGOs that aggressively oppose mining schemes in ecologically sensitive areas and tribals who are sharply aware of their hereditary rights and, with the backing of activist groups, stoutly resist any displacement from mine project areas. Because of these circumstances, Utkal Alumina's bauxite mine project in Orissa has been a non-starter, KIOCL is on the verge of closure, BALCO could not get a new bauxite mine in Madhya Pradesh started and Bhilai Steel is finding it difficult to get permission for a new iron ore mine in Chhattisgarh.

Part of the blame for this sharp rise in public antagonism to mining activity can be laid at the door of the mining sector itself. Indian mining companies have, by and large, behaved very irresponsibly in the past in mitigating the effect of their earth-tearing activities. The Damodar river has been turned into a black sewer by Coal India, Goa's landscape has been left a wounded red by its iron ore extractors, the granite miners of Karnataka have gouged out large holes on the ground, the Makrana marble mines of Rajasthan look like a bombed-out area and the Sandur manganese mine is a huge, unseemly gash in the surrounding forest. The sad part is that very, very few have attempted any sort of rehabilitation of the environs after extracting the mineral. Nalco's bauxite mine in Orissa is an exemplary exception. This attitude will have to change if the mining sector wants the public and the judiciary on its side.

Past Government policies restricting exploration and mining concessions for the private sector to small areas have resulted in most private sector mining being fragmented into small units which are under-capitalised, ill-planned, technologically primitive, unsafe and given to slaughter mining. Abundant examples of this can be found in Karnataka's Bellary-Hospet iron ore region, the marble mines of Makrana in Rajasthan, the granite mines of Karnataka and Tamil Nadu, sand mining in Tamil Nadu (before the recent takeover by the State), mica mines of Bihar, etc. There is little attempt here at long-range development and planned extraction. Hopefully, recent policy changes regarding lease areas and periods will lead to consolidation and better mining practices in the private sector.

Public sector mining projects on the other hand, though large in size, better equipped and taking more pains in planned exploitation, suffer from the maladies of over-manning, poor work culture, political interference, low capacity utilisation and corruption. One could write a book on the problems associated with Coal India, but just one factoid will suffice here. Its average OMS (Output per Man Shift) is a mere 0.6 tonnes for underground mines and 6 tonnes for opencast work. Comparable world averages are 10 times more. Can privatisation help matters? Not unless the political parties are prepared to loosen their grip.

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