NMDCs got Rs 18,000 crore for its expansion plans: Narendra Kothari

Written by BV Mahalakshmi | Updated: Jun 18 2014, 08:05am hrs
The National Mineral Development Corporation is expanding its business in Karnataka and Chhattisgarh and increasing its presence in the fields of coal, rock phosphate, lime stone, gold and diamond. Despite its expansion plans in steel making and other value-added products, Narendra Kothari, CMD, tells FE's BV Mahalakshmi that the Indian mining industry has been facing a critical phase in the last two to three years. Excerpts:

Being the single largest producer of iron ore in the country, what are your expansion and investment plans for the next five years

NMDC has grown to become a major Indian iron ore supplier both for domestic and international markets. We have achieved a record iron ore production from 30 million tonnes (MT) and sales of 30.5 MT for the year 2013-14. We have plans to increase iron ore production to 50 MT in the next five years. In the process, we are developing new mines Bailadila-11/B in Chhattisgarh and Kumarswamy in Donimalai in Karnataka besides expanding the production capacity of existing mines.

Our turnover stood at Rs 12,058 crore, which is higher by 13% compared to Rs 10,704 crore which was due to higher production and sales quantity by 4.23 MT. We have set aside a capex of Rs 2,518 crore for this year and have plans to spend about Rs 3,495 crore in FY14-15. Currently, we are producing around 22% of the country's iron ore production and have set a target to achieve 50% by 2019-20. This would entail an expenditure of Rs 3,500 crore for the company. For this year, the production target is to cross 31 MT of iron ore and 32 MT of sales.

Besides your focus on domestic market, how about acquisition of overseas assets

We are exploring all options for acquiring assets in the overseas markets. We have started due diligence in Indonesia for coal, rock phosphate assets in Russia besides some assets in Australia and Mozambique.With Rs 18,000 crore cash in hand, we are seriously looking at expanding our existing plants besides tapping the acquisition route.

What are the issues plaguing the mining industry at the moment

India is one among the top countries in terms of production of some minerals like iron ore, bauxite, coal, etc even while it lags behind in some minerals like potash, heavy minerals, etc. We need to increase steel production from the present level of 81 MTPA as compared with over 1600 MTPA for the world. To achieve the target of 300 MTPA of steel by 2025-26, iron ore requirement of 450-480 MT has to be achieved from the present level of 200 MTPA. New mines have to be developed and the capacity of the existing mines has to be increased. There is enormous potential for growth of mining in the country driven by both positive demand.

The Indian mineral industry is characterized by low reserve to resource ratio, less exploration funding, obsolete technology, less innovation, vague regulation regime, cumbersome procedures and burdened with taxes. Besides, there is unscientific and unsystematic mining, procedural bottlenecks and less concern for environmental issues.

The Indian mining industry is one of the most taxed industries in the world with effective tax of about 45% compared to other countries which ranges between 35% and 40%. This needs a re-look as the companies are left with fewer funds and are reluctant to go for additional exploration. If the exploration funds and research funds are given some tax benefits, then companies can concentrate more on exploration.

So given the concerns, what are the steps that need to be taken for driving growth in the mining sector

The present regulatory regime provides less scope for clarity and more scope for confusion. Getting all approvals for mining is a long drawn process with multiple agencies involved. The immediate need is to create a single window system for all the clearances which is also a long due demand for the mineral industry. Incidentally, companies are more interested in the mining aspect and are less interested in exploration. The longer the processing time of applications decreases the interest of the companies in the exploration. Besides, efforts are needed to attract the interest of mining companies in mining and exploration of other minerals also.

Added to the woes is the poor infrastructure for the Indian mining industry. This results in wastage of material and takes more transit time resulting in less capacity utilisation. Development of dedicated freight corridors linking the iron ore mines to the ports and rail heads is the need of the hour.

Such corridors can be developed in PPP model or a consortium of miners can develop and operate the rail line on a royalty or rent basis. Most of the mines in India are smaller in nature and are not suitable for scientific mining. There is a need for development of bigger mines and cluster mining to make mining more scientific and efficient.