Steel and Mines: Unleashing Potential

Steel and Mines are two important sectors of Indian economy. We took over the government with both the sectors in great stress. In the past two years, we have applied several correctives that will soon make India a leader in both steel and minerals, says Narendra Singh Tomar

01 July, 2016 Opinion, Industry
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The Steel Sector


The liberalisation of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the steel sector. While the existing units are being modernised/expanded, a large number of new steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies. In the last few years, the rapid and stable growth of the demand side has also prompted domestic entrepreneurs to set up fresh greenfield projects in different parts of the country.

Yet, the sector is passing through a difficult phase—mired by slowdown in production as well as consumption. The government has been sensitive to these problems and has been taking requisite steps from time to time.

Recently, when the imports spiked, particularly from China, Japan and South Korea, shouldering the responsibility to protect the domestic industry from this onslaught, the government levied anti-dumping duty and introduced other safeguards like minimum import price. The net impact of these will be felt as soon as the existing order commitments are complete. In the interim, the prices have improved and it is my earnest hope that soon these issues will be behind us.

During the last two years, while the world production has decelerated, we have increased our production by 8 MTPA. We have finished expansion and modernisation of Steel Authority of India (SAIL) plants at Rourkela, Bokarto, Burnpur and Selam. Bhilai will be complete soon.

These problems have been there for a long time, in fact, much before Modi government came to power. Such steps are long-term and are likely to have lasting impact once fully implemented. During the last two years, we have increased our production capacity by 8 MTPA. We have finished expansion and modernisation of Steel Authority of India (SAIL) plants at Rourkela, Bokarto, Burnpur and Salem. Bhilai will be complete soon. Rourkela Steel Plant’s capacity has been enhanced from 2 MTPA to 4.5 MTPA at an investment of Rs 12,000 crore. SAIL’s production capacity is being enhanced from 13 MTPA to 23 MTPA. Sail’s target is to reach 50 MTPA by 2025 at an investment of Rs 150,000 crore in the second phase. The second phase of RINL modernisation will attract an investment of Rs 4,000 crore, which will boost its capacity to 7.2 MTPA.

China is the largest producer and consumer of steel. India used to be the 4th largest producer of crude steel after US in the world during 2014. We became the 3rd largest producer in 2015. The world average consumption of steel is 217 kg per capita and we are at 59 kg—the scope of expansion is immense. India is preparing for this day as a result of which, we have undertaken measures to increase our capacity by 24 MTPA through Special Purpose Vehicle (SPV) route. These will be formed by SAIL in Chattisgarh; RINL in Odisha; NMDC in Jharkhand and Karnataka—MoUs have already been signed with Jharkhand and Chattisgarh.

While we have achieved quantities, the time is now to focus on quality of steel that will spur demand for Indian steel in the international markets.

We are focusing on Research & Development (R&D) and have set up Steel Research & Technology Mission for India (SRTMI) with an initial corpus of Rs 200 crore (Rs 100 crore from Steel Development Fund (SDF), Government of India and Rs 100 crore contributed by private and government companies).

We want to make the best steel in the world so that our dependence on others reduces and India earns more foreign exchange by way of increased exports.

The Mining Sector

The mining sector had ailed for long as the old Mines and Minerals (Development and Regulation), Act (MMDR) allowed for the mines to be allotted through procedures—first come, first served basis. This used to cause problems and also a loss to the national exchequer. The MMDR Act has since been amended that has removed discretion by instituting auction to be the sole method of grant of major mineral concessions and thereby bringing in greater transparency. It also provided the much-needed impetus to the mining sector by deemed extension of mining leases. This will also facilitate banks and financial institutions to liquidate stressed assets where a company or its captive mining lease is mortgaged. The move will spur mergers and acquisitions in the sector.

In addition, providence of timeline associated with each critical activity related to grant of concessions would foster ease-of-doing business in the mining sector.

Achieving and sustaining a high rate of economic growth, while sharing the benefits with the poor and weaker sections was the priority for undertaking the reforms in the mineral sector. The District Minerals Foundation is meant to address the long-standing demand of the local people in mining areas for inclusive growth.

There is provision to establish District Mineral Foundation (DMF) in the districts where mining takes place for safeguarding the interest of mining affected persons and simplification of procedures and removal of delay by removing the need for such “prior approval” from the Central Government. Similarly, approval of mining plan by the government would no longer be mandatory as a provision has been added under 5(2)(b) permitting the State Governments to devise a system for filing of a mining plan obviating need for approval by the Government.

A National Mineral Exploration Trust has been created out of contribution from the mining leaseholders for encouraging exploration. In addition, the transferability provisions for auctioned and captive leases would permit flow of greater investment to the sector.

In order to bring a check on illegal mining, the penal provisions have been made further stringent. Higher penalties and jail terms have been provided in the amendment. Further, a provision has been made for constitution of special courts by the state government for fast-track trial of cases related to illegal mining.

Rest of the developments in the mineral sector have followed from the amendment. 47 mineral blocks have been put up for auction by 9 State Governments. The e-Auctioning have concluded for 6 blocks, as follows:

  • Jharkhand, for two blocks of limestone on 12 February 2016;
  • Chhattisgarh, for 2 blocks of limestone concluded on 18 and 19 February 2016 respectively and 1 gold block as concluded on 26 February 2016; and,
  • Odisha in respect of 1 block of iron ore as concluded on 2 March 2016.

The success of e-Auction has not only put a stamp of approval on the auctioning scheme as envisaged by the Ministry, but more importantly it will harness substantial additional revenues to the states’ exchequers far much more than what is being collected through royalty.

The summary results of the first six mining blocks put to auction across the country show that minerals with estimated value of resources over Rs 29,800 crore have been disposed of in a transparent manner. The additionality to states’ exchequer through auctions only works out to be about Rs 13,000 crore over the lease period. Whereas cumulative royalty, DMF and National Mineral Exploration Trust (NMET) contributions work out to be Rs 4,565 crore, Rs 457 crore and Rs 91 crore, respectively.

It may be seen that anticipated revenue through auction, in fact, is over 2.5 times the amount of revenue to be accrued to State Governments through royalty, DMF and NMET put together.

The amendment of the MMDR Act had become necessary to address the emergent problems in the mining industry. In the last few years, the number of new Mining Lease granted in the country have fallen substantially. The mining industry was adversely impacted due to cloud of uncertainties prevailing over the issue of second and subsequent renewals remaining pending. The second and subsequent renewals were mainly affected by Court judgments. As a result, the output in the mining sector has come down drastically, leading to import of minerals by users of those minerals. As a result of policy paralysis India from being leading exporter of iron ore became net importer of iron ore as sector was plagued with discretion, delay and pendency became the norm, which in-turn affected the investments in the greenfield mining projects.

The results of Index of Industrial Production for 2015-16 up to the March 2016 indicate that during the period, mining and quarrying segment showed an increase of 2.2 per cent in comparison to same period last year.

Achieving and sustaining a high rate of economic growth, while sharing the benefits with the poor and weaker sections was the priority for undertaking the reforms in the mineral sector. The DMF is meant to address the long-standing demand of the local people in mining areas for inclusive growth. The contributions of 30 per cent of additional royalty by existing miners and 10 per cent by miners granted mines after the MMDR Amendment w.e.f. 12 January 2016. The annual budget of DMFs for major mineral States would be Rs 6,000 crore. The Government has formulated Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) to be implemented by the DMFs of the respective districts. The PMKKKY has mandated 60 per cent of the funds to be utilised for high priority areas, such as drinking water/environment preservation and pollution control/healthcare/education/skill development/welfare of women, children, aged and disabled people/sanitation and 40 per cent of the funds to be utilised for infrastructure – roads and physical infrastructure/irrigation/watershed development. The projects implemented under PMKKKY will help create a congenial mining environment, ameliorate the condition of the affected persons and create a win-win situation for all the stakeholders. 

The growth in the mining sector in terms of production of minerals has significantly improved in comparison to the recent past. It is pertinent to recall that the sector recorded a negative growth of 0.6 per cent for two consecutive years (2011-12 and 2012-13). The mining activities had been stalled owing to court cases, environmental, regulatory and land acquisition issues.

There has been a notable turnaround ever since government has taken initiative for policy reforms. This turnaround is very much visible in terms of growth in Gross Value Added (GVA) in mining and quarrying sector. The sector grew by 5.4 per cent and 2.4 per cent in 2013-14 and 2014-15 respectively. During 2015-16, so far the sector has recorded a growth of 3.6 per cent in comparison to similar period last year.

The results of Index of Industrial Production for 2015-16 up to the month of March 2016 indicate that during the period, mining and quarrying segment showed an increase of 2.2 per cent in comparison to same period last year.

There is a noticeable surge in mineral production in India. It is heartening to note that production of major minerals during the current financial year up to March has recorded the growth of 9 per cent in comparison to same period last year. The real contributor to this growth story have been Bauxite (27 per cent), Chromite (33 per cent), Copper Concentrate (30 per cent) , Iron ore (21 per cent) and Lead Concentrate (32 per cent) in the metallic segment. This growth story is significant as international commodity market is in a state of turmoil owing to weak signals coming from the Chinese economy.

Our Prime Minister Narendra Modi launched the ‘Make in India’ campaign on 25 September 2014. Creating opportunities for one million people slated to enter the job market every month, is a humongous task, which ‘Make in India’ has been launched to address. The ‘Make in India’ campaign has made all round impact by fostering awareness about the policy enablers brought out by the government in the last 2 years for promoting the investments. The early success stories of the ‘Make in India’ campaign are of major investments by international giants in the field of electronics, automobiles, aviation, railways and defense. The demand for the mineral sector is also slated to pick up with such huge investments being done in our economy.

The adoption of auctions for grant of mineral concessions has greatly shifted the burden of doing exploration on the government. A National Mineral Exploration Trust (NMET) was created through the MMDR Amendment Act, 2015. 13 exploration projects, costing around `28.21 crore, have already been identified to be considered by the Executive Committee of the NMET. A National Mineral Exploration Policy is also being formulated, to provide a framework for fostering exploration activities by private sector companies, primarily to attract the ‘juniors’ (international exploration companies).

The Ministry is committed to carrying forward the reforms which were initiated by the MMDR Amendment Act, 2015. The challenges being faced in the implementation of the provisions of the MMDR Amendment are being meticulously addressed and followed up with the State Governments, wherever required. The Prime Minister had launched ‘Make in India’ programme encompassing all vital areas in the manufacturing sector of the economy on 25 September 2014. The Ministry of Mines has contributed to the holistic ‘Make in India’ efforts by bringing about various changes in the policy framework, legislations and regulations.

A ‘Mining Surveillance System’ (MSS) for major minerals is being developed with the help of Bhaskaracharya Institute of Space Applications & Geo-Informatics (BISAG), Gujarat under DeitY, to curb the incidences of illegal mining with the use of space technology. This technology has minimum human interference, accessible to remotest area and automatic detection. The State Governments have been requested to provide the available digitised lease-wise information for all major mineral leases in their states for expediting the development of MSS. The State Governments may adopt the MSS for minor minerals where illegal mining cases are all the more rampant.

Further, an MoU for 3 years has been signed between Indian Bureau of Mines (IBM) and National Remote Sensing Centre (NRSC) on 21 January 2016, where it will provide remote sensing services for monitoring of mining activities. It will also organise training and give technical guidance to IBM for establishing a remote sensing cell.

A ‘Star Rating’ is proposed to be given to the mining leases for the efforts and initiatives taken for implementation of the Sustainable Development Framework (SDF). It is anticipated that the Star Rating of Mines will initiate a self-driven mechanism of compliance of all statutory provisions and incorporating best practices by mining. We want to start the evaluation of mines against the Star Rating of 1 to 5 based on their performance in FY 2015-16. The process of online filing of Star Rating template will be in place by soon and the mining lease holders will be required to fill up the evaluation template for Star Rating on self-certification basis within June 2016.

I am hopeful to get Cabinet approval on National Mineral Exploration Policy soon, that will boost exploration in the country, also ensuring the inter-generational equity of the minerals.

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