A crackdown on illegal iron ore mines, restrictions on coal mining and a moderate decline in gas production from Reliance Industries? Krishna-Godavari block have contributed to a contraction in mining output in the second quarter of this fiscal.
The situation could only worsen in the third quarter as it will take time for the problems to be removed, leading to a crippling of the performance of value-added industries like steel and power in the coming months, experts warned. If power generation growth, already below half-way mark of the 78,700 MW target for the five years ending 2012 worsens, it could severely hamper productivity and competitiveness across the board, they said.
While production from the RIL-operated D6 block kept declining, crude output from Cairn India?s Barmer field in Rajasthan showed robust growth, though it was not sufficient to offset the effects of a contraction in other mining industries. India?s natural gas output has been declining for 11 consecutive months beginning December 2010. Crude production, which had shown double-digit growth in the last two quarters of the previous fiscal and April this year, seemed to slow down a bit subsequently on account of good performance earlier.
Mining, which accounts for 14% of industrial production, contracted 5.6% in September compared with a 4.3% growth in the same time a year ago as Karnataka imposed a ban on mining to check illegal mining. Goa is believed to be contemplating a similar move. During April-September, mining output contracted 1% compared with a 7.2% growth a year ago.
GDP data showed that ?mining and quarrying? contracted 2.9% in the second quarter compared with an impressive 8% growth the same time a year ago.
Sesa Goa managing director PK Mukherjee said: ?This year, the stoppage of exports from Karnataka and lower exports from Orissa and Goa may result in a reduction of almost 30 % of exports of iron ore, which will definitely have a major impact on the national exchequer, balance of trade and GDP growth.? Iron ore exports were worth about 97 million tonnes last year, of which about 54 mt were from Goa itself, he said.
?Lower iron ore output could lead to problems for the steel sector, while a fall in coal output could affect electricity generation. Policy-makers should address the issues plaguing the sector and allow mining with proper checks and balances,? said DK Joshi, director and principal economist, Crisil.
Mining companies have called for a proper regulatory structure for the sector to solve its problems. ?There is a need for good governance in mining. The main reason behind lower mineral production is the lack of proper regulatory system. India is mineral-rich and we need measures that would make this sector a major contributor to the economy like in Canada and Australia,? said Essel Mining managing director Tuhin Mukherjee.
The sudden slowdown in mining sector growth could partly be attributed to erratic government policy. The ‘go-and no-go’ categorisation by former environment minister Jairam Ramesh had designated about 30% of 4,50,000 hectares encompassing 206 coal blocks, as strict ‘no-mining’ areas.
Though the categorisation was diluted later, a large portion of ‘no-go’ areas continues to await government clearances and production has suffered in the process. Coal production has been hit so severely that Coal India which accounts for 81% of the country’s coal output, has requested the coal ministry to lower its annual target to 448 mt from 452 mt. During April-September, the company missed its target by 20 mt, producing only 176 mt. The company had produced about 431 mt of coal last fiscal, almost the same output it recorded in 2009-10.
Pending clearances have held back work on coal projects and have made it difficult to even sustain the present level of coal production. The country’s demand-supply gap is likely to reach 142 MT this financial year as against its estimated production of 554 MT. It might go up to 200 MT in the next five years. The Commission had earlier estimated that coal production would reach 680 MT by 2011-12 but the estimate was later scaled down to 630 MT in a mid-term appraisal by Prime Minister Manmohan Singh. It has now been revised downward even further to 554 MT. India has world’s third richest coal resources with reserves estimated at around 275 billion tonne but poor infrastructure has prevented growth in output.
With inputs from Parul Chhaparia and Subhash Narayan