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  1. Goa judgement: A blow to India’s mining image

Goa judgement: A blow to India’s mining image

According to the Fraser Institute Annual Survey of Mining Companies 2016 report, India stands among the bottom 10 countries (97th rank out of 104) in the area of Investment Attractiveness Index, next to Afghanistan, Zimbabwe and Mozambique.

Published: February 27, 2018 4:38 AM
goa judgement, supreme court, goa, mines, Indian mining The mining lease renewal judgment by the Supreme Court on Goa will have a far-reaching impact not only on the state, but on India’s image as an investment destination as well. (Reuters)

The mining lease renewal judgment by the Supreme Court on Goa will have a far-reaching impact not only on the state, but on India’s image as an investment destination as well. When Piyush Goyal took charge of the ministry of mines in July 2016, he announced to work towards raising the mines and minerals sector’s contribution to the country’s GDP by an additional 1% in the next 2-3 years. But, on the contrary, the share came down from 2.2% to 2.1% in FY18. According to the Fraser Institute Annual Survey of Mining Companies 2016 report, India stands among the bottom 10 countries (97th rank out of 104) in the area of Investment Attractiveness Index, next to Afghanistan, Zimbabwe and Mozambique. China is ranked 54th, much ahead. One of the major reasons for the poor score is the perception about India’s policy factors that affects investment decisions, which include uncertainty concerning environmental regulations, regulatory duplication, the legal system and taxation regime, socio-economic and community development conditions, trade barriers, political stability, etc. These parameters are captured in the Policy Perception Index of the Survey, in which India ranks 84th out of 104 countries. The international perception about India’s mining industry and its attractiveness is definitely going to be maligned further from the recent incidence of Goa.

India might have flared nicely in terms of improvement in Ease of Doing Business, but the restrictions put by the legislative system on mining industry in the form of cap on iron mining (in Goa and Karnataka), high export duty, permission for export (of iron ore from Karnataka) are sending negative message against the so-called Ease of Doing Business. The latest Supreme Court order to wind up iron ore mining in Goa can send chills down the spine of any entrepreneur. For the last five years, FDI inflows to India have grown every year, thanks to efforts by PM Narendra Modi, and FY17 witnessed the highest inflow of $43,478 million. But the mining sector could attract only $56 million in FY17. Mining is still carried out a in a dated method and it needs high-end technology and equipment to increase extraction, productivity, safety and surveillance. For that, India badly needs FDI in mining. But who will invest when the very ownership can be snatched away on just a month’s notice?

Mining is capital-intensive. To meet domestic demand for iron ore, India requires 437 million tonnes by 2030-31, as per the National Steel Policy 2017; it’s 240 million tonnes more than current levels. India needs Rs 36,000 crore investments to augment iron ore supply to meet this demand. With the banking sector plagued by NPAs, it’ll be difficult for serious players to raise funds to develop mining assets. At a time when the ministry of mines is redrafting the National Mineral Policy and the ministry of steel is aiming at having 300 million tonnes steel capacity, such developments put a big question mark on the authenticity of the numbers and the plausibility of delivering those. Iron ore from Goa is mainly exported to China and Japan; this requires enormous efforts to establish confidence on timely and regular supply of material as the production and raw material procurement plan cannot be changed frequently. Goan miners could re-establish that confidence following the three-year-long mining ban, which is again at stake now. Such an incidence can tarnish India’s image as a reliable supplier, which may impact export potential.

When India’s growth story is marred by shrinking job creation, a complete halt of mining at a short notice can make thousands of people jobless. There will be huge losses to the national exchequer in terms of royalty and other taxes, while loss of forex is estimated at $600 million from Goa alone. It’s time the government realises that to make ‘Make in India’ happen, ‘mine in India’ is a must. But the way India’s mining sector is being intervened by the judicial system, days are not far when the manufacturing industry will lose its competitive advantage of secured supply of minerals.

By: Manoj Kumar

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