Mines & Minerals

The demand profile of raw materials for cement such as limestone and gypsum are expected to witness disruptive growth in the next few decades. The second largest cement industry in the world, the Indian cement industry is expected to grow to 550 million tonnes per annum of capacity by FY2025 from 502 mtpa in 2018.

Limestone comprises 95% of core raw material for cement production. No wonder then that the cement sector governs demand, supply and pricing of limestone (as well as coal) to some extent.  According to some estimates, around 180-250 kg of coal and about 1.5 tonne of limestone is required to produce a tonne of cement. Cement manufacturing consumes minerals such as gypsum, Quartz, bauxite, coal, kaolin (china clay) and iron ore too in varying amounts.

Limestone is also a leading contributor to the Indian exchequer in terms of value from the non-metallic minerals basket. The total contribution in FY 2017 amounted to INR 26.73 billion through payments under Royalty, District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET). The sector contributed INR 2.2 billion through Corporate Social Responsibility (CSR) activities that covered areas such as living conditions (economic, social, and environmental) and infrastructure that benefited local communities.

The Indian mining industry offers enormous potential with abundant mineral resources. The policies regulating the production of minerals are considered to be a key resource for the development of the nation.

According to some estimates, around 180-250 kg of coal and about 1.5 tonne of limestone is required to produce a tonne of cement.

Government intervention

The Mines & Minerals (Development & Regulation) Act, 1957:

The MMDR Amendment Act, 2015 has replaced the practice of ‘first-cum first serve’ with mineral block allotment and has introduced auctions to bring in transparency and avoid discretion.

Policy enables transfer of captive mining leases and mergers and acquisitions among companies having captive leases. All mining leases are granted for a period of 50 years.

FDI Policy:

In order to attract foreign investment, upto 100% FDI is allowed under the automatic route. Cumulative FDI inflows into the metals and mining sector between April 2000 and June 2018 stood at US$ 14.33 billion as per Department of Industrial Policy and Promotion (DIPP). Specifically in the cement sector, FDI inflows into Cement and Gypsum products reached US$ 5.26 billion between April 2000 and June 2018.

A large number of foreign players have also entered the market owing to the profit margins, constant demand and right valuation.

National Mineral Exploration Policy (NMEP, 2016):

Under this policy, about 100 blocks have been identified by GSI for auctioning on revenue sharing mechanism for regional exploration to encourage private participation.

Trends

A large number of foreign players are in India owing to the profit margins, constant demand and right valuation offered the mining sector.

Policy Updates

FDI Policy:
  • FDI cap in the mining and exploration of metal and non-metal ores have been increased to 100% under the automatic route.
  • Coal & Lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalization) Act, 1973.
The MMDR Amendment Act, 2015:
  • The amended Act has replaced the ‘first-cum first serve’ mechanism of mineral blocks allotment with a transparent and competitive auction process in place.
National Mineral Exploration Policy (NMEP, 2016):
  • To encourages private sector participation through its revenue sharing model.

Useful Links

The Ministry of Mines, Government of India – https://www.mines.gov.in/

The Indian Bureau of Mines – https://ibm.gov.in/

The Federation of Indian Mineral Industries (FIMI) – http://www.fedmin.com/Indexmain/

Coal India limited – https://www.coalindia.in/en-us/home.aspx

Make in India – http://www.makeinindia.com/home

India Brand Equity Foundation (IBEF) – https://www.ibef.org/