Indian Mining Industry Report

Industry Size

The Mining industry in India is a major economic activity which contributes

significantly to the economy of India.
 The GDP contribution of the mining industry in 2011-12 was 2.26% but
going by the GDP of the total industrial sector it contributes around 10%
to 11%. The contribution of mining and quarrying sector to GDP for the
year 2011-12 is estimated at INR 516.06 Billion.
 Total value of mineral production (excluding atomic) during 2011-12 is
estimated at INR 2,103 billion.

Key Players

Coal India Limited

Coal India Limited (CIL) is an Indian state-controlled coal mining company
headquartered in Kolkata, West Bengal, India. It is the largest coal producer
company in the world and contributes around 81% of the coal production in
India. It produced 452 million tonnes of coal during FY 2012–13 and earned a
revenue of INR 882.81 billion from sale of coal in the same financial year.

Revenue Non- Total Coal

Coking
Subsidiary Employees INR billion coking Production
coal (MT)
(FY 2012-13) coal (MT) (MT)
Bharat Coking Coal Limited 61,698 89.37 26.97 4.243 31.213
Central Coalfields Limited 48,126 92.38 16.156 31.905 48.061
Eastern Coalfields Limited 74,276 97.4 0.043 33.868 33.911
Mahanadi Coalfields Limited 22,065 120.93 0 107.894 107.894
Northern Coalfields Limited 16,073 99.86 0 70.021 70.021
South Eastern Coalfields Limited 73,718 176.48 0.157 118.062 118.219
Western Coalfields Limited 54,960 74.23 0.33 41.957 42.287
Central Mine, Planning & Design
3,142 6.05 0 0 0
Institute Limited
Coal India Africana Limitada   0 0 0 0
Sub-total 3,54,058 756.72 43.656 407.95 451.606
North Eastern Coalfields 2,376 0 0 0.605 0.605
Dankuni Coal Complex 551 0 0 0 0
CIL Headquarters 941 13.78 0 0 0
Total 3,57,926 770.49 43.656 408.555 452.211

[Source: Annual Report, Coal India Limited]

Financials for past 3 years (FY10-11, FY11-12, FY12-13):

Earnings:

Expenditure:

Profit:
Source: Coal India Ltd. [ https://www.coalindia.in/DesktopModules/DocumentList/documents/Coal_AR_2012_-
_13_Deluxe_25102013(1).pdf ]

National Aluminium Company Limited

National Aluminium Company Limited (NALCO) is a government owned
organization working under Ministry of Mines. The company is rated best in
mining industry in India and largest producer of Aluminium and bauxite.
Financials for the year that ended on 31.03.13 :

Source: Annual Report 2012-13, NALCO India [ http://www.nalcoindia.com/download/Annual-Report-2012-13.pdf ]

Hindalco (Aluminium)
Hindalco Industries Ltd. is an aluminium manufacturing company and is a
subsidiary of the Aditya Birla Group. Its headquarters is at Mumbai,
Maharashtra, India. Its market capitalisation by the end of May 2013 was US$
3.4 billion.

National Mineral Development Corporation

A government of India organization and comes under the Ministry of steel, it is
the largest iron ore producer in the country. The company has three operating
iron ore mines located in Karnataka and Chhattisgarh producing a total of 15
MT ore/year.
NMDC is the only organised producer of diamond in India from its Majhgawan
mine at Panna, Madhya Pradesh.
Capacity: 84000 carats/annum
Total Recovery: 1005064 carats approx. (Till 30.04.2012)
Vedanta Resources
Vedanta Resources plc is a global diversified metals and mining company
headquartered in London, United Kingdom. It is the largest mining and non-
ferrous metals company in India.
Operations:
Sterlite Industries (India) Ltd. is a subsidiary of Vedanta Resources plc, a
diversified and integrated metals and mining group. The company is based in
Mumbai, India. On 31 March 2013, the company's market capitalisation was
INR 31,490 crores (US$ 5.79 billion).
Financials of FY12-13 and FY11-12:

Hindustan Zinc Ltd is headquartered in Udaipur in the state of Rajasthan.

Hindustan Zinc is a leading producer of zinc.
Financials for FY2012-13 and FY2011-12:
Particulars FY2012-13 FY2011-12
Revenue from operations (Gross) 13658.14 12061.09
Less: Excise Duty(-) 958.3 655.78
Revenue from operations (Net) 12699.84 11405.31
Other Income 2032.15 1542.83
Total Revenue 14731.99 12948.14

Expenses
Cost of materials consumed 793.06 217.69
Change in inventories of finished goods and -112.54 94.44
work-in-progress
Employee benefits expense 649.91 534.64
Finance Costs 29.1 13.95
Depreciation & Amortisation 647.04 610.67
Other Expenses 4887.77 4489.08
Total Expenses 6894.34 5960.47

Profit before exceptional item & tax 7837.65 6987.67

Exceptional Item 17.53 43.13

Profit before tax 7820.12 6944.54

Tax Expense (benefits)

Current Tax expenses 1542.98 1408.95
(Less): MAT Credit (-) 798.47 134.37
Short/(Excess) provision for tax relating to 10.57 19.89
prior errors
Net Curent Tax Expense 755.08 1254.69

Deferred Tax - For the year 165.56 135.63

Deferred tax - Prior Year 0 28.18
Deffered tax 165.56 163.81
Net tax Expense / (benefit) 920.64 1418.5

Profit - for the year 6899.48 5526.04

Earning/equity share (Rs) (of 2/- each)

Basic and diluted 16.33 13.08
Mineral Production in India:
At present, India produces 87 minerals:
  4 fuels
 10 metallic
 47 non-metallic
 3 atomic
 23 minor minerals ( building and other minerals)
India is major producer of following minerals:
(Production for 2011-12)

[Source: Ministry Of Mines, Govt. of India]

Map 1: Metal Minerals occurrence across India
Map 2: Non-metal minerals occurrence across India
Coal, Iron Ore, Chromite are few of the most important minerals exploited in
India.
Coal
Coal India Limited is the largest coal producer company in the world and
contributes around 81% of the coal production in India.
The following tables shows the production of both non-coking and coking coal
by CIL.

Iron
The domestic production of iron ore has seen a major dip since 2010-11. From
208 million tonnes, in 2010-11, it fell to 167 million tonnes in 2011-12, and in
2012-13 it declined to about 120 million tonnes. In the fiscal year (2013-14)
data for the first three months suggests that production will be restricted to
about 100-110 million tonnes. Largest producer of Iron in India is National
Mineral Development Corporation.
Import-Export of Minerals
Coal:
India is the third largest producer of coal in the world after USA and China. It
sits on the fourth most coal-rich reserves in the world. Still it is unable to meet
its own coal demands and imported coal quantity is multiple times of what is
exported.
Export-Import Figures for Coal for the period of 2006-11.

68918
2010-11
4327

73257
2009-2010
2471

59004
2008-09
1656

49792
2007-08
1627

43079
2006-07
1548

0 10000 20000 30000 40000 50000 60000 70000 80000

Import Quantity ( 000 Tonnes) Export Quantity ( 000 Tonnes)

Chart: Comparison in Export-Import Quantity of Coal (‘000 Tonnes)

41549
2010-11
1152

39180
2009-2010
521

41341
2008-09
348

20739
2007-08
277

16689
2006-07
313

0 5000 10000 15000 20000 25000 30000 35000 40000 45000

Import Value (Crores) Export Value (INR Crores)

Chart: Comparison in Value of Export vs Import of Coal

Iron:
Domestic iron ore production exceeded domestic demand till 2011-12, a very
small quantity of iron ore would be imported based on specific commercial
consideration of individual companies. However, the subsequent fall in
production resulted in India importing about 3 million tonnes in 2012-13.
Preliminary estimates of Indian Bureau of Mines predict about import of 20MT
of Iron ore for the year 2013-14.
As for exports, the significant fall in production in the last few years resulted in
exports of iron ore to fall dramatically. Following a global meltdown in demand
and export ban in Karnataka and Goa, exports of iron ore from India declined
significantly from a peak of about 117.36 million tonnes in 2009-10 to about
60.6 million tonnes in 2011-12, and which is forecasted to further decrease to
about 15-20 million tonnes in the 2013-14. The current export policy provides
for exporting iron ore of Fe content up to 64% and exports of iron ore from
India are primarily to China (about 90%), followed by Japan and Korea.

Limestone:
The exports of limestone ranged from 1 to 2.4 MT to neighbouring countries
during the last three years, whereas imports were from 4 to 5 MT, mainly of
calcium carbide, chalk and bleaching powder etc.

For more detailed information about all the mineral exported and imported
by India.
Exports: http://mines.gov.in/annual201112/3.2.pdf
Imports: http://mines.gov.in/annual201112/3.3.pdf

Mineral Demand and Supply

India has significant potential to further grow its mining industry. This potential
is apparent from both — the demand for minerals and the availability of
natural resources in India.
Countries typically go through a mineral consumption curve where per capita
consumption of minerals accelerates during the industrialization period
(developing phase) and gradually stabilizes or declines later (developed
phase). A relative comparison of India with various countries suggests that
India is still at an early stage on the mineral consumption curve. Even amongst
the BRIC (Brazil, Russia, India and China) nations, India is the least developed in
terms of per capita mineral consumption. As India’s per capita GDP increases,
its mineral consumption will grow at a rapid pace in line with the growth
witnessed in other emerging markets like China and Brazil.

Iron Ore
Production (Supply)
The production of Iron has been on a decline since 2010-11.
Production
Year (MT)
2010-
11 208
2011-
12 168
2012-
13 120
2013-
14 100-110
[Figure for 2013-14 is expected]
The massive fall in production from 2010-11 to 2011-12 can easily be
attributed to the fact that there was temporary discontinuance of mining
operations in Karnataka. Subsequently there has been a ban on mining in Goa
and some fall in production from iron ore mines in Odisha, which cumulatively
will see production of iron ore in India get halved in 2013-14 as compared to
2009-10 i.e. in 4 years.

Demand
The demand for iron ore is expected to be from the domestic steel industry,
from the domestic sponge iron industry, and from China, especially of ores
with lower Fe content. On the domestic front, iron and steel industry accounts
for over 58% of the total iron ore consumption whereas sponge iron accounts
for about 40%.

Coal:
Annual consumption of raw coal in India for last three years.

Raw Coal Consumpti on (MT)

403.91
Electricity 395.84
309.58
16.05
Washery and Steel
17.26
16.45
13.4
Cement
15.08
14.66
2.62
Paper
2.43
2.34
99.76
Others 92.86
89.77
0 50 100 150 200 250 300 350 400 450

2011-12 2010-11 2009-10

Others include cotton, jute, bricks, coal for soft coke, colliery, fertilisers & other
industries consumption.
[Source: Office of the Coal Controller, Ministry of Coal]

Chromite:
India is world’s 2nd largest producer of Chromite. The apparent consumption by
2016-17 is estimated at 4.35 million tonnes while production is estimated to
reach 7 million tonnes by the end of 12th plan.

For past 40 year’s information:

http://mosofspi.nic.in/mospi_new/upload/Energy_Statistics_2013.pdf?
status=1&menu_id=216
Limestone:
Limestone occupies the top position among non-fuel solid mineral deposits as
per volume of annual extraction. The mining of about 250 million tonnes of
limestone for the cement industry is only next to coal.
Production:
As per Indian Bureau of Mines, the production of limestone in 2011-12 was at
around 257 million tonnes, an increase of 4% over the 240 million tonnes
produced in 2010-11, which was again a marginal improvement over the
previous year. This is more or less in line with the growing demand of cement.
About 95% of the total production of limestone is of cement grade, 3% of iron
& steel grade and the rest 2% consists of chemical and other grades.

Demand:
As mentioned above, 95% of the total production of limestone is of cement
grade. So production of limestone is essentially for the manufacture of cement.
In terms of volume of cement production, India is second only to China.
While considering GDP growth rate of 8% in the 12th plan, the projected
cement consumption is required to grow at 10% per annum. This would mean
an annual production requirement of about 600 million tonnes per annum
production of limestone would be required by 2016-17 or roughly double of
the present capacity of about 300 million tonnes per annum. [Planning
Commission]
Key Consumption Industries

Mineral Industry

Coal Power, Steel, Cement

Limestone Cement, Iron and Steel, Chemicals

Iron Ore Iron and Steel

Bauxite Oil and Gas, Paints and Plastics

Chromite Transportation, Packaging and Construction

Zinc Metal Iron and Steel (galvanisation), Communication equipment(alloys)

Manganese Iron and Steel, Packaging (as alloy with Aluminium)

Lead Metal Paints

Copper Electronics, Architecture (roofing etc.), Alloys

Aluminium Transportation, Packaging and Construction

Challenges faced by the Mining industry in India:

There are a set of regulatory and administrative challenges in India which

restrict the growth of mining in India.
1. The current regulatory provisions make it difficult, if not impossible, to
transfer mining leases. The prospecting licenses are not transferable.
There is no guarantee of obtaining mining lease even if a successful
exploration is done by a company. The mining licenses are typically
awarded on a first come first serve basis in principle but there is no
transparent system.
2. Getting all approvals for mining is a long drawn process with multiple
agencies involved. Further, there are substantial delays in disposal of
various applications for clearances.
3. There are limited incentives for private sector to invest in improvement of
technology and equipment in mining projects as the mining industry is the
most heavily taxed industry in India.

Inadequate infrastructure facilities

The inadequacy of infrastructure is related to the absence of proper
transportation and logistics facilities. Many of our mining areas are in remote
locations and cannot be properly developed unless the supporting
infrastructure is set up
1. The railway connectivity in most key mining states is poor and it has
inadequate capacity for volumes to be transported which adds to the
overall supply chain cost.
2. There is inadequate capacity at ports for handling minerals and the
rail/road connectivity to some ports is very poor.

Sustainability
Mining activity in any area impacts the environment as well as the socio-
economic set-up. Therefore, ensuring that the adverse impacts are minimized
and the benefits from mining to the impacted community are optimized
becomes critical for mining to be being carried out in a sustainable manner.

The importance of sustainability in mining is illustrated by the number of

projects rejected by Ministry of Environment and Forests(MoEF) on the
grounds of being unsustainable.
In the past 17 years, out of 2842 mining projects proposed for forest clearance
only 1723 (approx. 60%) have been granted clearance by MoEF.

[Source: Ministry Of Environment and Forests, Govt. Of India]

Government Regulations and Policy in Mining Industry

Mines and Minerals (Development and Regulation) Act, 2011 [cleared by

Cabinet]
 Mining lease can be granted in notified areas only by competitive
bidding.
 Provides for a new mineral exploration licence for investors interested in
deep-seated mineralization.
 Assured and seamless transition from exploration to mining.
 Independent regulations and Tribunal to address grievances and
complaints.
 Ensures greater acceptability of mining projects by local area through
sharing royalty with local area for development.

National Mineral Policy, 2008

Participatory
 Encouraging private sector participation in exploration
 Induction of high-end technology for exploration and mining
 Introduction of new concession Large Area Prospecting License (LAPL).

Regulatory
 Right of grant of concession to the prior applicant
 Full transferability to encourage specialized exploration
 Mine closure and sustainable development
 Creation of independent Mining Tribunal

Foreign Direct Investment (FDI)

As per Department of Industry Policy and Promotion’s Consolidated FDI Policy
Circular of 2014 [ http://dipp.nic.in/English/Policies/FDI_Circular_2014.pdf ],
FDI in mining sector is illustrated in following points.
  FDI in mining and exploration of metal and non-metal ores including
diamond, gold, silver and precious ores but excluding titanium bearing
minerals and its ores; subject to the Mines and Minerals (Development
& Regulation) Act, 1957 is allowed up to 100% through automatic route.

 FDI in coal and lignite mining for captive consumption by power projects,
iron and steel and cement units and other eligible activities permitted
under and subject to the provisions of Coal Mines (Nationalization) Act,
1973 is allowed up to 100% through automatic route.

 FDI for setting up coal processing plants like coal washery subject to the
condition that the company shall not do coal mining and shall not sell
washed coal or sized coal from its coal processing plants in the open
market and shall supply the washed or sized coal to those parties who
are supplying raw coal to coal processing plants for washing or sizing is
allowed up to 100% through automatic route.
 FDI in mining and mineral separation of titanium bearing minerals and
ores, its value addition and integrated activities subject to sectoral
regulations and the Mines and Minerals (Development and Regulation
Act 1957) is allowed up to 100% through government approval route.

[Source: Press Information Bureau, Govt. Of India]

Coal Block Allocation Policy

There was no specific criteria for allocation of coal blocks in India till 1993.
From 1993 onwards, the Ministry of Coal started awarding blocks to private
parties for captive mining on recommendations of the Inter-Ministerial
Screening Committee or through direct allocation. The concept of allocation of
captive coal blocks through competitive bidding was first announced in 2004.
However, the government finalised the modus operandi of the mechanism
only in 2013.
 Bidding Methodology: Production linked Payment – Under this method,
bids are invited on the basis of a production linked multiple. The bidder
that quotes the higher multiple wins the bid. The floor price in this case
will be a floor multiple and the bidder is required to quote a multiple
greater than the floor multiple. The same methodology will be
applicable for explored as well as upgraded regionally explored blocks. A
basic upfront payment (10% of intrinsic value of block) would be
prescribed to ensure some minimum commitment to develop block right
from the start.
 Setting of Floor Price: First the intrinsic value is obtained by computing
its Net Present Value, based on Discounted Cash Flow (DCF) approach.
The final NPV (after discounts and subtracting basic upfront payment
received from the bidder) is then proposed to be annuitized to become
equal to a Re/tonne number.
 Criteria for selection of bid: Re/tonne bidding (with yearly escalation
linked to Weighted Price Index) would be criteria for auction of both
explored blocks as well as regionally explored blocks.
Reserves and Feasibility Study

Coal
The estimated reserves of coal was around 293.5 billion tones, an addition of
7.64 billion over the last year. [31.03.12]
The estimated reserve of lignite was 41.96 billion tonnes against 40.91 billion
tonnes in 2010-11. [31.03.12]

Status Of Coal Reserve in India

Proved
Inferred
40%
Indicated
49%

11%

[Source: Ministry Of Mines, Govt. Of India]

Iron Ore:
Hematite and Magnetite are the two most important iron ores found in India.
As of April 1, 2010, Hematite resources amounted to 17,882 million tonnes.
Of this, 8,093 million tonnes (45%) were under the reserves category and the
balance 9,299 million tonnes (55%) under the resource category. The
Magnetite reserves amounted to 10,644 million tonnes.
Following table illustrates the exploration data (in Million Tonnes) of Iron Ore
(Haematite and Magnetite) over the past 30 years.
[Source: Indian Bureau of Mines]

It may be seen that during 2005 and 2010, Hematite resources have increased
by 3,252 million tonnes (1,089 million tonnes reserves and 2,162 million
tonnes resources). On the other hand, Magnetite resources have largely
remained static during this period.

Aluminium (Bauxite)

Bauxite resources in the country, as on April 1, 2010, were 3,480 million

tonnes, of which 593 million tonnes are reserves and remaining 2,887 million
tonnes are resources. By grades 84% of resources are of metallurgical grade.
There were 345 leases that were granted for bauxite mining as on April 1, 2010
covering an area of 30,059.10 hectares. Out of the 345 mines, 200 were
operational.
There are abundant bauxite reserves in the country. Of nearly 3 billion tonnes
of metallurgical grade resources, less than 600 million tonnes are under the
operating mining leases. However since they are located in heavily forested
areas, inhabited by indigenous people; mining has been unable to start in
these regions.

Chromite:
The total resources of chromite in the country as on 1.4.2010 was estimated at
203 million tonnes comprising 54 million tonnes reserves and the remaining
149 million tonnes being categorized as resources. Thus 27% of the estimated
potential is reserves and 73% is resources.
Chromite is a scarce mineral in India with 1% of the total reserves of the world
whereas exports are 30-35% of the world share. Unless resources are
converted into reserves, and with production slated to be substantially above
domestic demand, exports would increase and India would be facing a
shortage of Chromite. Given the requirement of the stainless steel industry,
the reserves are likely to last for only 20 years. There is therefore a need to
conserve this critical input for the growth of domestic steel industry.
Manganese Ore:
The total resources of manganese ore in the country as on April 1, 2010 was
430 million tonnes. Out of this, 142 million tonnes (33%) are categorized as
reserves and the balance 288 million tonnes (67%) as resources.

Coal Mining History:

 1947: With Independence, India embarked on 5-year developmental
plans. At the beginning of the 1st Plan, annual production went up to 33
million metric tons.

1956: Setting up of the National Coal Development Corporation (NCDC),

a Government of India Undertaking in 1956 with the collieries owned by
the railways as its nucleus was the first major step towards planned
development of Indian Coal Industry.

1956: Singareni Collieries Company Ltd. (SCCL) which was already in

operation since 1945 became a Government company under the control
of Government of Andhra Pradesh in 1956, India thus had two
Government coal companies in the fifties.

1957: Introduction of Mines and Minerals (Development and

Regulation) Act, 1957. It was enacted so as to provide for the regulation
of mines and development of minerals under the control of the Union.
The Act has been amended in 1972, 1986, 1994 and 1999 in keeping
with changes in the policy on mineral development.

India's coal industry has always produced less coal than the quantity
demanded. This shortage situation caused backing down of the power plants
and became serious by the growing needs for the steel industry. However,
private mine owners were not putting sufficient capital investment to solve the
national energy deficiency. Also, the unscientific mining practices and poor
working conditions of labour of private mines were being concerned. Due to
these several reasons, Indian government decided to nationalize its coal
mining industry in the early 1970s.

1971: Nationalisation of coking coal mines. The Coking Coal Mines

(Emergency Provisions) Act, 1971 provided for taking over in public
interest of the management of coking coal mines and coke oven plants
pending nationalisation.

1972: The Coking Coal Mines (Nationalisation) Act, 1972 under which
the coking coal mines and the coke oven plants other than those with
the Tata Iron & Steel Company Limited and Indian Iron & Steel Company
Limited, were nationalised on 1.5.1972 and brought under the Bharat
Coking Coal Limited (BCCL), a new Central Government Undertaking.
1973: Nationalisation of non-coking coal mines. The Coal Mines (Taking
over of Management) Act, 1973 was enacted. It extended the right of
the Government of India to take over the management of the coking and
non-coking coal mines in seven States including the coking coal mines
taken over in 1971. This was followed by the nationalisation of all these
mines on 1.5.1973 with the enactment of the Coal Mines
(Nationalisation) Act, 1973 which now is the piece of Central legislation
determining the eligibility of coal mining in India.

1975: In 1975, Eastern Coalfields Limited, a subsidiary of Coal India

Limited, was formed. It took over all the earlier private collieries in
Raniganj Coalfield. Raniganj Coalfield covers an area of 443.50 square
kilometres (171.24 sq. mi) and has total coal reserves of 8,552.85 million
metric tons (9,427.90 million short tons). Eastern Coalfields puts the
reserves at 29.72 billion metric tons (32.76 billion short tons).

1975: Western Coalfields Limited, a subsidiary of Coal India was formed.

It inherited all the private sector coal mines of the Maharashtra and
Madhya Pradesh. Coalfields. WCL has its head office at Nagpur. Central
Coalfields Limited, also a subsidiary of Coal India Ltd. was formed. The
registered and corporate office is at Darbhanga House, Ranchi,
Jharkhand.

1985: WCL and CCL were bifurcated to for South Eastern Coalfields Ltd.
(SECL) and Northern Coalfields Ltd. (NCL) respectively for administrative
purposes.

1993: The first National Mineral Policy (NMP) was enunciated by the
Government in 1993 for liberalization of the mining sector. The National
Mineral Policy, 1993 aimed at encouraging the flow of private
investment and introduction of state-of-the-art technology in
exploration and mining.

2004: Proposal of a competitive-bidding mechanism for Coal block

allocation by Govt. of India.

2008: Revision of National Mineral Policy

2012: Coal block allocation scam or Coalgate. Unfair allocation of coal
blocks costing the exchequer approximately 1.86 lacs in the process as
per the report drafted by the Comptroller and Auditor General (CAG).

2013: Coal Block Allocation mechanism devised by the Govt. of India for
fair and competitive allocation of coal blocks.