The refusal of bauxite mining rights at Niyamgiri in Orissa marks a major turning point in the battle for natural resources in India. The clash between the investors, who argue about the need for tapping the rich potential of India?s natural resource base to meet the growing needs of the fast growing economy, and the opposing interests who focus primarily on needs for protecting the claims of tribals and the needs of environment has now continued for decades. But despite the growing resistance to these development efforts, its impact on the mineral economy has so far been limited as the claims of the developers have always received the first priority of the government, since the country has historically been a net importer of minerals and metals, with the gap between demand and supply steadily growing with the rapid increase in income and consumption.
In cases where the costs of large new projects to the existing claimants or to the environment were too high, the permission was usually withheld in the initial stages of the project itself. The refusal of claim for resources to existing projects or the stoppages of project operations once already initiated were rather very rare. In fact, the first stoppage of a major natural resource-based project happened only a few years ago when the Kudremukh iron ore facilities were closed down after court orders as the mining operations were likely to infringe on the national park in the area. So, the recent refusal of permission for mining of the rich bauxite reserves at Niyamgiri and the decision to stop NTPC?s controversial 600-mw Loharinag Pala hydel project on Bhagirathi river in Uttarakhand by the group of ministers, with both coming in close succession, has raised serious concerns among investors.
This is because the recent developments imply that the preferred government policy of giving the first priority to development needs and protection of environment and tribal interests through compensatory schemes like forestation of denuded lands and rehabilitation projects seems to have been shelved, at least temporarily. Planning Commission numbers show that this strategy, which has been successfully implemented till now, has led to the displacement of 21.3 million people between 1951 and 1990 for building development projects, including irrigation dams, hydroelectric projects, open cast and underground coal mines, and mineral-based industries.
So what has suddenly happened to reverse the government?s emphasis on the primacy of development that has served the country so well for the last few decades and what would be its implications? To answer the first question, many will point to the growing competition to placate large political groups. Other policy experts like NC Saxena, member of the NAC, attribute the toughening of the stance to the efforts being made by the industry to subvert the systems set up to protect the environment like the requirements for compensatory reforestation, which largely remains on paper, as he pointed out in FE earlier this week.
But what is more important is to understand the implications of such restrictive policies for the growing demand for land and minerals, which has steadily grown over the years with domestic production going up from a bare Rs 58 crore in 1947 to Rs 30,000 crore in 2000-01 and rising more than four-fold to touch Rs 1,27,921 crore by 2009-10. But despite the zooming output the demand far exceeded supply with imports of Rs 5,13,632 crore being more than four times the exports of Rs 1,08,837 crore in 2008-09.
The demand for minerals is expected to zoom up even faster now (especially of coal and iron ore, the foremost minerals in quantitative terms) as India?s $1-trillion plus economy grows rapidly over the next few decades. Projections made by various agencies show that the demand for coal is expected to go up from 731 million tonne in 2012 to as much as 2,600 million tonne by 2032, with demand growing at an annual rate of 6%. The production of iron ore, which surged up from 165 million tonne in 2005-06 to 226 million tonne in 2009-10, is expected to go up sharply as steel consumption doubles or even trebles over the next few decades.
However, the prospects of meeting the growing demand for minerals is not very encouraging, given the sharp change in this policy stance. This is already reflected in the mining sector, as the most recent numbers show that the growth of mines has declined from 2,942 in 2007-08 to 2,729 in 2009-10. The shrinkage is extensive, encompassing both metallic and non-metallic minerals, indicating the growing impact of the restrictive policies. Even in the case of coal, where surging demand has raised imports to 59 million tonne by 2008-09, the number of mines have stagnated at 507 over the last three years. A state-wise analysis of the major mineral-producing areas also shows that production has declined in most. Certainly, all this is bad news for an economy already hit by a growing mineral deficit in recent years.
p.raghavan@expressindia.com