Post on 24-Mar-2020
SustainableMining
Catalyst for InclusiveEconomic Growth
Knowledge Partner
YEAR July, 2014
COPYRIGHT
DISCLAIMER
CONTACTS
YES BANK Ltd.
Sanjay PalveSenior Group President & Senior MD
Tushar PandeySenior President, PSPM
Registered and Head Office
th9 Floor, Nehru Centre,Dr. Annie Besant Road,Worli, Mumbai - 400 018
Tel : +91 22 6669 9000Fax : +91 22 2497 4088
Northern Regional Office
48, Nyaya Marg, ChanakyapuriNew Delhi – 110 021
Tel : +91 11 6656 9000Email : sanjay.palve@yesbank.in
tushar.pandey@yesbank.inWebsite : www.yesbank.in
Federation of Indian Mineral Industries (FIMI)
R. K. SharmaSecretary General
FIMI HouseB-311, Okhla Industrial AreaPhase I, New Delhi - 110 020
Tel : +91 11 2681 4597Fax : +91 11 2681 4594Email : fimi@fedmin.comWebsite : www.fedmin.com
TITLE Sustainable Mining – Catalyst for Inclusive Economic Growth
AUTHORS Public & Social Policies Management (PSPM) and Wholesale Banking (WB), YES BANK
No part of this publication may be reproduced in any form by photo, photoprint,
microfilm or any other means without the written permission of
YES BANK Ltd. & FIMI
This report is the publication of YES BANK Limited (“YES BANK”) & FIMI and so YES BANK & FIMI has editorial control over the content, including opinions, advice, statements, services, offers etc. that is represented in this report. However, YES BANK & FIMI will not be liable for any loss or damage caused by the reader's reliance on information obtained through this report. This report may contain third party contents and third-party resources. YES BANK & FIMI takes no responsibility for third party content, advertisements or third party applications that are printed on or through this report, nor does it take any responsibility for the goods or services provided by its advertisers or for any error, omission, deletion, defect, theft or destruction or unauthorized access to, or alteration of, any user communication. Further, YES BANK & FIMI does not assume any responsibility or liability for any loss or damage, including personal injury or death, resulting from use of this report or from any content for communications or materials available on this report. The contents are provided for your reference only.
The reader/ buyer understands that except for the information, products and services clearly identified as being supplied by YES BANK & FIMI, it does not operate, control or endorse any information, products, or services appearing in the report in any way. All other information, products and services offered through the report are offered by third parties, which are not affiliated in any manner to YES BANK & FIMI.
The reader/ buyer hereby disclaims and waives any right and/ or claim, they may have against YES BANK & FIMI with respect to third party products and services.
All materials provided in the report is provided on “As is” basis and YES BANK & FIMI makes no representation or warranty, express or implied, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title or non – infringement. As to documents, content, graphics published in the report, YES BANK & FIMI makes no representation or warranty that the contents of such documents, articles are free from error or suitable for any purpose; nor that the implementation of such contents will not infringe any third party patents, copyrights, trademarks or other rights.
In no event shall YES BANK & FIMI or its content providers be liable for any damages whatsoever, whether direct, indirect, special, consequential and/or incidental, including without limitation, damages arising from loss of data or information, loss of profits, business interruption, or arising from the access and/or use or inability to access and/or use content and/or any service available in this report, even if YES BANK & FIMI is advised of the possibility of such loss.
Maps depicted in the report are graphical representation for general representation only.
Mining is one of the key drivers of economic development, investment and employment generation thin the country. Though India is the 4 largest mineral and iron ore producer, the sector's share in the
total GDP has remained flat at approximately 2% over the last 15 years. With over 80 billion tons of untapped mineral reserves, India's Mining & Minerals sector has the potential to contribute up to INR 11.25 lakh crore to GDP and create 15 million jobs by 2025.
The demand for various metals and minerals is expected to grow 4-5 times over the next 15 years (9-11% growth per annum) driven by huge demand stemming from rapid urbanization and growth in the manufacturing sector. Despite its enormous potential, the sector is plagued with regulatory challenges, unresolved policy issues, inadequate infrastructure facilities and environmental and capacity issues. The Government needs to augment its policy framework and encourage institutional innovation to revive growth momentum in the sector.
In this regard, the Mines and Minerals Bill will pave the way for high-tech exploration in new blocks, foster competition and ensure adequate compensation for displaced communities. Additionally, sustainable development based on a Social Equity Model is the key to ensuring that economic benefits of mining related activities are shared with the local communities in a fair and equitable manner. Further, incentivizing investments and rationalization of taxes will make India more competitive in the sector.
I am pleased to present the FIMI - YES BANK Knowledge Report 'Sustainable Mining: Catalyst for Inclusive Economic Growth' which highlights policy measures critical for the growth trajectory of the sector.
I am confident that the contents of this knowledge report will provide important insights for realizing the true potential of our resourceful Mining and Minerals industry.
FOREWORD
Thank you.
Sincerely,
Rana Kapoor
Managing Director & CEO
1. Mining as a ‘Growth Engine’ of Development .......................................................1
1.1 Mining - The Economic catalyst ..........................................................................2
1.2 Global Scenario and Developments ....................................................................6
1.3 An Indian Perspective..........................................................................................8
2. Sustainable Mining – Imperative for Socio Economic Balance ..........................15
2.1 Institutional framework under Mining– Centre and State .................................18
2.2 Policy and Regulatory Environment...................................................................22
2.3 Governance in Mining .......................................................................................25
2.4 Making Policies Sustainable for Inclusive development...................................27
3. Sustainability Practices in Mining – Case studies – India, Canada, Australia & South Africa ................................................................35
4. Mining Industry - Key Challenges ........................................................................45
5. Social Equity Model of Development – Ensuring Sustainable Growth in the Sector..............................................................................................51
6. Way Forward ...........................................................................................................57
CONTENTS
Mining as a 'Growth Engine' of Socio-Economic Development
01
1.1 Mining – The Economic Catalyst
Mining is one of the core sectors bolstering
economic development and growth. It not only
contributes to GDP but also acts as a catalyst
for growth in other core sectors like
Manufacturing, Infrastructure, Power, Steel,
Cement etc. Primary activities in the sector
therefore fuel growth in an economy. Hence, it
is important from India’s perspective to
optimally utilize its mineral resources to attain
the necessary industrial growth and achieve a
balanced socio economic development. To
achieve this it is imperative to drive
investments in scientific exploration, promote
sustainable mining practices, involve greater
private sector involvement and conduct
geoscientific research and development.
Mining as an industry has vast implications on the development of an
economy through its multiplier effect on growth. It has the potential to
influence and shape economies directly and indirectly through generation of
Mining as a 'Growth Engine' of Socio-Economic Development01
Acts as a catalyst
for the growth in
other core
industries like
power, steel,
cement, etc.
which are critical
for the overall
development of
the economy
2 | Sustainable Mining – Catalyst for Inclusive Economic Growth
employment opportunities, increasing government revenues, attracting foreign direct
investment, earning foreign exchange from exports leading to vast opportunities for driving
economic growth.
There exists strong linkages between Mining and global growth, with mining as a
prerequisite to sustain and accentuate any form of growth stimulus activity. The following
graphs display these trends:
• Close linkages between Global GDP growth and demand for Metals
Over the last few decades (1970-2009), demand for metals has been observed to follow
Global GDP time indicating a high degree of correlation between the two variables. The
figure below displays patterns of correlation.
Sustainable Mining – Catalyst for Inclusive Economic Growth | 3
Figure 1: Linkages between Global GDP growth and Demand for Metals
-30
-20
-10
0
10
20
30
Global GDP Aluminium Copper Zinc
1971 7
198 8
192
1986 9910
9914
1998
2002 6
200
2001
Source: State of the Market: Mining, Intierra RMG
% C
han
ge
fro
m p
revi
ou
s ye
ar
Case Study: Mining the 'Turnaround' story for Brazil
Mineral Exports: Brazil’s mineral exports
drastically improved its external balance from a
highly negative position in the 1990’s to a
positive one of US$50 billion by 2010.Minerals
grew to account for 33% of Brazil’s total exports
by 2010 (from 22% in 1995).
Foreign Direct Investments: Over the recent
years, the share of mining in FDI inflows has
varied between 3% and 24%. The mining sector
however does play a larger relative role in terms
of national investment.
Total Direct Employment: Total direct formal
employment in 2009 in the extractive sectors accounted for almost 300,000 persons. The
mining sector alone accounted for 232,000. This however represents less than 1% of the
total occupied labour force of Brazil. But it is important to note that in Southeast Pará,
employment was highly significant accounting for nearly 20% of total employment.
Moreover, the indirect effects are also large.
Source: The mining sector in Brazil: building institutions for sustainable development, ICMM, April 2013
The mining industry also plays a vital role in the world economy primarily due to its position
in the resource supply chain. It has been responsible for stimulating growth in many
countries and has markedly contributed towards socio economic development and poverty
reduction. Many surveys have also revealed that foreign exchange earnings from mining
have positive developmental effects. Hence, the Mining industry is gradually gaining
importance due to its spillover effects bolstering other policy objectives of job creation and
poverty reduction
Sustainable Mining – Tool for Economic growth: Mining plays a very significant role in
determining economic progress and can be used as a tool for promoting inclusive growth.
This makes the 'Sustainability' aspect of mining critical to understand and implement. The
various shortcomings of mining have made it imperative to adopt strategies and practices
which are sustainable in the long run. Community involvement in decision making and
execution is critical to ensure the benefits reach grassroot level. Moreover, sharing benefits
with local communities and consciously adopting environment friendly techniques are vital
to bolster sustainable mining initiatives.
4 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Aim
üReturn on CapitalüRetain license to operateChallenges
üGovernment Expectations and multiple agencies
üPolicy uncertainties and bottlenecks
üGovernment requirements for royalties, taxes, profit share, and social spend can erode profitability
üInability to understand and meet community needs
Outcome
üRisk and Uncertainty
Business
Government
Mining Constituents
Community
Aim
üShare in mining wealth
üSocial growth and expansion
üPreservation of culture, heritage and environment
Challenges
üLack of effective delivery
üLimited willingness of Mining industry
Outcome
üSocial unrest and frustration
Aim
üMaximize revenue to the state
üProvide infrastructure and social services
üProtect Environment and heritage
Challenges
üMultiple agencies involved with the government
üPolicy delay, uncertainty and bottlenecks
Outcome
üLack of effective delivery to last mile communities
üLack of Revenue maximization
üJudiciary stepping in to protect community interest
Sustainable Mining – Catalyst for Inclusive Economic Growth | 5
Figure 2: Sustainable Mining Constituents
Source: YES BANK Analysis
1.2 Global Scenario and Developments
Over the last decade, the nominal value of world mineral production experienced a drastic
rise.
The value in 2010 was nearly four times than that in 2002. During this period the rise in the
value of world mineral production was higher than the rise in the world gross domestic
product (GDP). This was largely attributed to the exceptional performance of China, India
and other emerging economies along with the sharp rise in commodity prices. This period
contrasts with the period 1992-2002 that saw zero nominal growth after adjusted for
inflation.
Metals Mines 7,000 13,000 20,000
Aggregates 15,000 0 15,000
Coal Mines 8,000 7,000 15,000
Industrial Minerals 1,000 1,000 2,000
Total 31,000 21,000 52,000
Ore (Mt) Waste Total
Figure 4: Annual Global Output in Metric Tonnes (2013)
6 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Figure 3: Global Exploration Projects
Source: Raw Material Database
Source: State of the Market: Mining, Intierra RMG
Figure 5: At the commodity level 2013
Coal 7,800,000 85 663
Iron Ore 1,900,000 130 247
Copper 17,000 7,100 121
Gold 2.65 42,300,000 112
Nickel 1,700 14,000 24
Zinc 13,000 1,800 23
PGMs 0.48 30,300,000 15
Diamonds 0.025 580,000,000 14
Bauxite 240,000 45 11
Lead 3,600 2,000 7
Top Ten Total 9,975,000 NA 1,237
Mined (‘000t) Price (US$/t) Value PA (US$ bn)
Source: The Mining Journal, September 2013
0
200
400
600
800
1000
1200
Other Zinc Silver Gold Copper
Source: State of the Market: Mining, Intierra
Figure 6: Exploration Expenditures in the World by Commodity
Figure 7: Global Drilling Activity (Number of District Prospects Drilled)
According to the Mining Journal, September 2013, global drilling has experienced a decline
since the end of 2011 and is continuing, with drilling reports available on 1,053 prospects in
June 2013 quarter versus 1,479 in the previous quarter. This was further lower than the
2,072 prospects drilled in September 2012 quarter.
In the last few years, the Global Mining industry has experienced decline in prices with little
prospects of early recovery due to lackluster demand. In addition to significant pressure on
operating costs and a heightened threat of resource nationalism.
The scenario has further aggravated due to the restricted supply of finances, especially for
mineral exploration.
Sustainable Mining – Catalyst for Inclusive Economic Growth | 7
Source: State of the Market: Mining, Intierra RMG
Figure 8: Market Value of Top Mining Companies (in billion U.S. dollars)
Market Value in billion U.S. dollars
1.3 An Indian Perspective
The Indian Mining sector has been recognized as
an important sector supporting India’s GDP and
catalyzing growth in the manufacturing sector. It
contributes nearly 2 percent of the National GDP. th India has also been ranked 4 with respect to the
volume of minerals produced after China, United
States and Russia according to the Report on
Mineral Production by International Organizing
Committee for the World Mining Congress. India
is a well endowed mineral abundant nation but
has still a long way to achieve is nascent
potential.
India produces about 87 minerals, of which 4 are fuel minerals, 10 metallic minerals, 47
non-metallic minerals, 23 minor minerals and 3 atomic minerals. Minerals can be broadly 1classified as fuel and non-fuel minerals . There are mainly four fuel minerals – Coal, Lignite,
Petroleum and natural gas. Atomic minerals could also be included under this category. 2These fuel minerals are mainly used for the generation of electricity .
Non-Fuel minerals can also be classified into metallic and non-metallic minerals including
minor minerals. Metallic minerals are mainly those that can be melted to create new
products, whereas non-metallic minerals are those that cannot be melted to make new
products and are mainly sedimentary rocks.
1 Source: Report on Mineral Production by International Organizing Committee for the World Mining Congress. 2 Source: www.mines.nic.in
8 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Source: Statista, the Statistics Portal
0 50 100 150 200
BHP Billiton, Austrailia/UK
Rio Tinto, Australia/UK
Vale, Brazil
China Shenhua Eneragy, China
Xstrata, UK
Glencore International, UK
Coal India Ltd, India
Angla American, UK
Barrick Gold, Canada
Goldcorp, Canada
Newmont Mining, U.S.
1947
The Mining Sector
flourished after
independence primarily
due to the impact of
the successive Five Year
Plans
1956
The Central Government
promulgated Industrial
Policy Resolution;
The exploration of
minerals was intensified
and the Geological
Survey of India was
strengthened;
Indian Bureau of Mines
was established to look
after the scientific
development of mineral
resources
1972
Mineral Exploration
Corporation
established to
conduct exploration
with focus on coal,
iron ore, limestone,
dolomite and
manganese ore
Present
India is the largest producer
of sheet mica, the third
largest producer of iron ore
and the fifth largest producer
of bauxite in the world;
Crude steel production in
India expanded at a CAGR of
6.8 per cent over 1980-2011;
India accounted for 7.3 per
cent of the metals and mining
industry in the Asia-Pacific
region in 2011
Figure 9: Mining Scenario in India since Independence
Source: YES BANK Analysis
Sustainable Mining – Catalyst for Inclusive Economic Growth | 9
Despite the growing importance
of the Mining sector in the
economic progress of a country,
its contribution to GDP has been
declining over time. In 1992-93,
the sector contributed 3.4% of
India's GDP. This figure declined
to 3.0% in 1999-2000 and 2.3%
in 2009-10. Over the last few
years, the sector contracted
further with its contribution
standing at about 2% in 2012-13.
As per analysis conducted for every one percent increment in the growth rate of mining and quarrying an incremental growth of 1.2 – 1.4% is observed in industrial production a n d c o r r e s p o n d i n g l y , a n approximate increment of 0.3 percent in the growth rate of India's
3GDP
3 Source: Development of the Indian Mining Industry–Way Forward, FICCI Mines and Minerals Division, October 2013
10 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Figure 10: Mines in India
Source: CSI India
India is one of the most mineral rich countries in the world with major concentration in
Eastern and Southern India.
1.3.1 Mines in India
The Indian Mining industry comprises of several small operational mines. 3,108 mines in
India reported mineral production in 2012-13 versus 3236 in the previous year. Of the 3,108
mines reported, the 93.92% of mines were reported in Andhra Pradesh (583), followed by
Rajasthan (374), Gujarat (350), Madhya Pradesh (300), Tamil Nadu (281), Jharkhand (280),
Odisha (175), Chhattisgarh (165), Karnataka (160), Maharashtra (139) and West Bengal 4(121) .
4 Source: Ministry of Mines, Government of India, Annual Report 2012-13
Sustainable Mining – Catalyst for Inclusive Economic Growth | 11
1.3.2 Mineral Production
Mineral production during 2012-13 was reported from 32 States/Union Territories (actual
reporting of MCDR and fuel minerals from 21 States and estimation of minor minerals for
all 32 States/Union Territories) of which 88% of the value of mineral production was
confined to 11 States (including offshore areas) only.
2008-09 2009-10 2010-11 2011-12
Non-Metallic Minerals including Minor Minerals 25,000 30,000 40,000 40,000
Metallic Minerals 35,000 30,000 45,000 45,000
Fuel Minerals 1,15,000 1,38,000 1,55,000 1,55,000
0
50000
100000
150000
200000
250000
300000
Figure 11: Value of Mineral Production (By Groups)
Valu
e in
Rs
Cro
re
Source: Ministry of Mines, Government of India, Annual Report 2012-13
The leading position with respect to the value of mineral production is held by offshore
areas contributing a share of 21.6% to national output. This is followed by Odisha with a
share of 11.56% followed by Rajasthan (9.58%), Jharkhand (8.88%), Andhra Pradesh
(7.98%), Chhattisgarh (6.91%), Gujarat (5.95%), Madhya Pradesh (5.27%), Assam (4.45%),
Goa (3.09%) and Uttarakhand (2.72%) in the total value of mineral production. The
remaining 21 States and Union Territories have an individual share of less than 3%, together
accounting for 12% of total value during 2012-13.
116
118
120
122
124
126
128
130
132
2008-09 2009-10 2010-11 2011-12 2012-13
Index of Mineral Production (Base 2004-05 = 100)
Ind
ex
Index of Mineral Production (Base 2004-05 = 100)
Source: Ministry of Mines Annual Report 2012-13
Figure 12: Index of Mineral Production
Figure 13: Share of States in Value of Mineral production
Uttar Pradesh2%
Remaining States9%
Chhattisgarh7%
Gujarat6%
Madhya Pradesh5%
Assam5%
West Bengal4%
Offshore22%
Rajasthan13%Odisha
11%
Andhra Pradesh9%
Jharkhand7%
12 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Source: Annual Report 2012-13, Ministry of Mines, Government of India
1.3.3 Mineral Exports in India
Given the nascent stage of mining in India, the mining industry is expected to experience
an accelerated growth in exports demand. The key minerals that are exported from India are
iron ore, alumina and chromite. As per global forecasts the demand for these minerals is
likely to increase in the near future. The following figure gives the growth predictions of
steel production, cement demand and thermal power capacity. Global demand for both iron
ore and aluminium is expected to grow at the rate of 10% whereas the global demand of 5ferrochrome is predicted to grow at 7% per annum in the coming years.
0
20
40
60
80
100
120
2005 2010 2015E
Crude Steel Production(Mn tonnes)
0
100
200
300
400
2005 2010 2015E
Cement Demand (MTPA)
Thermal Power capacity (GW)
200
150
100
50
0
Source: Morgan Stanley, Cement Manufacturers Association, Economist Intelligence Unit, Ministry of Power and Planning Commission, Government of India
Share of States in Value of Mineral production 2013-14 (Estimated)
Figure 14: Trends in Crude Steel Production, Cement Demand and Thermal Power
5 Source: Morgan Stanley, Cement Manufacturers Association, Economist Intelligence Unit, Ministry of Power and Planning Commission, Government of India
Sustainable Mining – Catalyst for Inclusive Economic Growth | 13
The last few years saw a significant decline in the production of minerals, especially iron
ore. After the global meltdown and export ban in Karnataka and Goa, exports of iron ore
declined markedly from 117.36 million tonnes in 2009-10 to about 60.6 million tonnes in
2011-12. The 30% export duty on iron ore and the higher railway freight charges for iron ore
exports have exacerbated exports today and have become unviable in comparison to the 6
international prices of 130 USD per tonne .
3As per the current policy, up to 64% of Fe content in iron ore is permitted to be exported .
These are mainly exported to China (nearly 90%), followed by Japan and Korea. In totality,
the iron ore consumption in India has increased at a CAGR of 15.1%. This value stood at
55.52 million tonnes in 2005-06 and increased to 111.4 million tonnes in 2010-11. Currently,
India needs at least 140 million tonnes (MT) of iron ore for its consumption and aims to 7achieve a steel production target of 300 million tonnes per annum (mtpa) by 2025 .
Currently, the mining industry in India is yet to reach its full potential as vast deposits of
minerals are mostly located in dense forest areas or areas that are considerably populated.
As per statistics, the mining areas under deep forest with avg. forest cover for 50 major
mineral producing districts is 28%. These regions also have tribal habitation. As a result,
there is a greater responsibility to ensure conservation and adopt effective rehabilitation
initiatives to ensure mining practices are environmentally sustainable. Moreover, greater
investments in exploration, research and development are critical to exploit India’s resource
base. A new programme tracking environmental parameters such as air quality, waste
characteristics, water quality etc. will be instrumental in monitoring mining activities.
1.3.4 Forest Cover under Mining
6 Source: http://steel.nic.in/policy.htm7 Source: Mid-year plan review of Ministry of Steel, GoI
7%19% 21% 25% 29% 31%
41%
60%
Bihar Karnataka India MP Jharkhand Odisha Chattisgarh Goa
Figure 16: Forest Cover in Indian States
Forest Cover as % of total Geographic area
Source: JPM India Metals and Mining, Asia Pacific Equity Research, August 2013
14 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Figure 15: India's Forest Cover
Source: Forest Survey of India
Sustainable Mining – Imperative for Socio Economic Balance
02
Over several decades, Mining has been identified as a vital contributor to
growth and development in a country. The industry has also made key 8
contributions to employment with nearly 700,000 people employed in India .
However, the outlook towards conducting mining has evolved over time with
greater emphasis being laid on the sustainability aspect .The ‘sustainability’
idea was essentially born under the banner of the Global Mining Initiative
(GMI) in 1998 that lead to the insertion of the term ‘‘sustainable mining’’ during
the World Summit on Sustainable Mining (WSSD) in 2002. Thus, a new facet
of Mining emerged, essentially defined as:
“Mining that is financially viable; socially responsible; environmentally,
technically and scientifically sound; with a long term view of development;
uses mineral resources optimally; and ensures sustainable post-closure land
uses. Also one based on creating long term, genuine, mutually beneficial
partnerships between government, communities and miners, based on 9
integrity, cooperation and transparency .”
To ensure overall development and inclusive growth, it has become imperative
to adopt sustainable mining practices that encourage community participation
and augment rural income and livelihood. The potential sustainability issues in
Mining encompass the following aspects:
Sustainable Mining – Imperative for Socio Economic Balance02
16 | Sustainable Mining – Catalyst for Inclusive Economic Growth
8 Source: http://www.cci.in/pdf/surveys_reports/mineral-mining-industry.pdf9 Source: Sustainable Development Framework For Indian Mining Sector, Final Report, November 2011,
ERM India Pvt. Ltd
• Environmental Sustainability: The most vital concerns in environmental sustainability
include usage of energy and water by mining companies and the impact of mining activities
on biodiversity, global warming and climate change. Waste management is critical as open
pit mining creates major disruptions to the landscape and current techniques of
rehabilitating the pits is expensive. It has therefore become imperative to scrutinize the
environmental impacts of suppliers’ practices and transportation of materials and worker
actions to ensure mining practices are environmentally sustainable.
• Social Sustainability: Worker health and safety is a major concern for the mining
industry. Worker and community
s a fe t y ; H I V / A I D S r e d u c t i o n s ,
stakeholder engagement; policies
related to life cycles of mining
operations and human rights are key
focus area. Companies will be
required to preserve indigenous culture
and heritage as most of the mines are
situated in areas with indigenous
populations. Additionally stakeholders
concerns mining communities need to
be redressed immediately .
• Economic Sustainability: Over the years, mining companies have faced several
criticisms claiming that they don’t operate in ways that bolster long term economic
sustainability. Operating irresponsibly in the social and environmental spheres tend to
generate mistrust in these companies which in turn harms investor confidence in these
Sustainable Mining – Catalyst for Inclusive Economic Growth | 17
18 | Sustainable Mining – Catalyst for Inclusive Economic Growth
companies and damages their reputation, therefore exacerbating their investment potential.
To ensure economic sustainability, mining companies are challenged to ensure sustainable
growth of local communities through institutions and infrastructure that support
communities beyond the life cycle of the mine. Identifying areas of particular significance in
terms of economic development, outlining policies focused on assessing the contribution
of mining companies to communities and ensuring that goods, materials and services are
drawn from local communities is critical for economic sustainability.
With several benefits associated with mining in India, focus should be on providing open
and transparent data on tax and royalty and how these benefits have been distributed at
the local, regional and national levels. The
Governments should look at adopting
effective mechanisms that maximize
transparency, understanding and acceptance
of how direct financial flows from mining
activities are allocated in ways that are
appropriate to their political and legal
systems.
India’s mineral development history is as old as civilization with mining activities being
traced as far back as 6,000 years. The presence of the ruins of old mine workings are a
witness to this fact. A few of these workings have also been the reason for some of the
major discoveries of mineral deposits.
However, the major thrust to the mineral
development occurred only after 1947
when India gained political independence,
when the impor t ance of minera l
development in nation building was
recognized. Identifying the significance of
the role of mining in growth and
development, the Central Government
enforced the Industrial Policy Resolution in
1956 under which several industries were
aimed to be developed for which increasing
quantities of minerals were required.
2.1 Institutional framework under Mining– Centre and State
2.1.1 Background
Sustainable Mining – Catalyst for Inclusive Economic Growth | 19
To acknowledge the immense potential of this sector, the Government of India has
consciously opened private investments to boost funds and attract technological and
managerial expertise. This has increased global interests in the Indian Mining sector and led
to opening up of the industry to Foreign Direct Investment after the New Mineral Policy,
1993.
The Ministry of Mines undertakes surveys and
exploration of all minerals except natural gas,
petroleum and atomic minerals; mining and
metallurgy of non ferrous metals like aluminum,
copper, zinc, etc.
The list of subjects allocated to the Ministry of
Mines, Attached Office, Subordinate Office, Public
Sector Undertakings and Research Institutions under
the administrative control of Ministry of Mines are
given below:
2.1.2 Institutional Framework Today, nearly 80% of
the mining is done in
coal and the remaining
20% is done in various
metals and raw
materials including
copper, bauxite, iron,
gold, lead, zinc
Figure 17: List of Subject allocated to Ministry of Mining and other Associated Bodies
Source: Ministry of Mines, GoI
Legislation for regulation of mines and development of minerals within the territory of India, including mines and minerals underlying the ocean within the territorial waters or the continental shelf, or the exclusive economic zone and other maritime zones of India as may be specified, from time to time by or under any law made by Parliament
Regulation of mines and development of minerals other than coal, lignite and sand for stowing and any other mineral declared. As prescribed substances for the purpose of the Atomic Energy Act, 1962 (33 to 1962) underthe control of the Union as declared by law, including questions concerning regulation and development of minerals
All other metals and minerals not specifically alloted to any other Ministry/Department, such as aluminium, zinc, copper, gold, diamonds, lead and nickel
Administration and Management of Indian Bureau of Mines
Planning, development and control of, and assistance to, all industries dealt with by the Ministry
Administration and Management of Geological Survey of India
20 | Sustainable Mining – Catalyst for Inclusive Economic Growth
The following are organizations associated with the mining sector.
Organization in Survey and Exploration
• Geological Survey of India (GSI)
This organization of earth science studies, set up in 1851 is the subordinate office of the
Ministry of Mines, Govt. of India. GSI provides vital earth science inputs into all aspects of
national economic development.
• Mineral Exploration Corporation Limited (MECL)
Established in 1972, the Mineral Exploration Corporation Limited (MECL) is the foremost
exploration agency in the country conducting exploration activities. The exploration activities
are primarily carried out under promotional programme sponsored by the Government of
India on behalf of agencies including the State Government and Public & Private Sectors.
Nearly 144681 million tonnes of mineral reserves was added to the National Mineral 10
Inventory till December 2011 .
Geological survey and
mineral prospecting
Petro logical & ore
dressing studies
Exploration
Assessment of reserves & grade in lease
hold areas
Detailed exploration by drilling
Figure18: Exploration Process
Source: YES BANK Analysis
Organizations in Regulation and
Conservation
• The Indian Bureau of Mines (IBM)
The IBM is a subordinate office attached
to the Ministry of Mines. It is
respons ib le fo r p romot ing and
conserving minerals, protecting mines
e nv i r o n m e n t a n d s c i e n t i f i c a l l y
developing the mineral resource of the
country other than coal, petroleum and
natural gas, atomic mineral and minor
minerals.
10 Source: www.mines.nic.in
Sustainable Mining – Catalyst for Inclusive Economic Growth | 21
In addition to the above, there
a r e s eve r a l a u t o n o m o u s
research institutions associated
with the Ministry:
a) National Institute of Rock
Mechanics (NIRM), Kolar
Gold Fields (Karnataka)
b) National Institute of Miners'
Wealth
c) Jawaharlal Nehru Aluminium
Research Development and
Design Centre (JNARDDC), Nagpur
A very extensive role is played by the State Departments of Geology and Mining in the
process of exploration for minerals, regulation and mineral administration
Figure 19: Mineral Administration Process
Source: YES BANK Analysis
Mineral administration
Collection of mineral revenue & dead rent
Stoppage of illegal mining and illegal transportation of
minerals
Grant of mineral concessions
Ensuring systematic & scientific mining, plantation,
environment conservation and welfare schemes for
mine laborers.
Royalty assessment collection
22 | Sustainable Mining – Catalyst for Inclusive Economic Growth
All the major minerals in India come under the domain of the central government and the
minor minerals come under the domain of the State Governments who have formulated
mineral concession rules for this rationale. In the federal structure, the State Government
owns the minerals in their respective territorial jurisdiction. Whereas the Central
Government holds rights in off-shore areas, exclusive economic zones and the continental
shelf.
Management of mineral resources is the responsibility of both the Central Government and
the State Governments in terms of Entry 54 of the Union List (List I) and Entry 23 of the
State List (List II) of the Seventh Schedule of the Constitution of India.
The Mines & Minerals (Development and Regulation) (MMDR) Act, 1957 (MMDR Act) is the
main legislation laying down the legal framework for the regulation of mines and
development of all minerals other than petroleum and natural gas. The Mineral Conservation
and Development Rules, 1988 (MCDR) and Mineral Concession Rules, 1960 (MCR) are
supplementary legislations, governing the Indian Mining industry (except Coal, Lignite,
atomic and minor minerals). Mining and consumption of Coal and Lignite is governed by the
Coal Mines (Nationalization) Act, 1973 and subsequent amendments.
MMDR Act was enacted when the Industrial Policy Resolution 1957 was the guiding policy
for the sector, and thus was aimed primarily at providing a mineral concession regime to
Mining industry which was dominated by public sector undertakings (PSUs).
After liberalization in 1991, a separate National
Mineral Policy was drafted in 1993 (NMP 1993)
which encouraged the role of the private sector
in exploration and mining. NMP 1993
recognized the need for encouraging private
investment including Foreign Direct Investment
(FDI), and for attracting state-of-art technology
in the mineral sector. The policy stressed that
the Central Government, in consultation with
the State Governments, shall continue to
formulate legal measures for the regulation of
mines and the development of mineral
resources to ensure basic uniformity in mineral
that development of mineral resources was
aligned to the national policy goals.
2.2. Policy and Regulatory Environment
2.2.1 NMP 1993
Sustainable Mining – Catalyst for Inclusive Economic Growth | 23
To achieve these objectives, MMDR was amended twice in 1994 and 1999 alongwith
MCDR and MCR). Introduction to include opening up foreign investment in exploration and
mining, of the concept of reconnaissance, as a stage before prospecting, empowerment of
State Governments in granting/extending mining leases, making rules to curb illegal mining,
etc. However NMP 1993 did not achieve its objectives as share of the private sector did not
increase significantly.
To address the shortcomings of NMP 1993 and provide a fillip to private investment, the
Central Government formed a High Level Committee in 2005/06 under Mr Anwarul Hoda
(Hoda Committee). The report submitted by the Hoda Committee provided inputs for
promulgation of the National Mineral Policy in 2008 (NMP 2008).
National Mineral Policy 2008 enunciated measures like changes in the role of the Central
Government and the State Governments to incentivize private sector investment in
exploration and mining. It also assured right to next stage of mineral concession,
transferability of mineral concessions and transparency in allotment of concessions in order
to reduce delays, encourage investment and technology flows in the mining sector in India.
NMP 2008 also sought to ensure mineral availability through augmentation in reserve base,
improvement in mining methods, beneficiation and utilization of low-grade ore, rejects and
recovery of associated minerals. Lastly, NMP 2008 also sought to develop a Sustainable
Development Framework (SDF) for optimum utilization of mineral resources for industrial
growth while it sought to protect the interests of the local population in mining areas.
Since the MMDR Act and its subsequent amendments would not have clearly reflected the
objectives of NMP 2008, the Central Government decided to introduce the draft MMDR Bill,
2011 for enactment to replace MMDR Act
1957. However, the Central Government’s
inability to push the Bill through during the th
tenure of the 15 Lok Sabha has resulted in
to lapse Bill and with it the proposed
reforms it tried to implement. Key features
of the lapsed MMDR 2011 Bill included:
• Implement a simple and transparent
mechanism for grant of PL or ML
through competitive bidding
2.2.2 NMP 2008
2.2.3 Draft MMDR Bill, 2011 and current state
24 | Sustainable Mining – Catalyst for Inclusive Economic Growth
• Provide for sharing of profits and royalty with project affected persons (PAP) / local
community through creation of District Mineral Fund (DMF)
• Introduce better legislative environment for attracting investment and technology
• Set up a National Mining Regulatory Authority (NMRA) with responsibilities including
advising the government on aspects of quality standards, mineral conservation
strategies, review of existing royalty rates, sustainable mining, etc
• Set up National Mining Tribunal and State Mining Tribunal to exercise jurisdiction, powers
and authority proposed in the new legislation
• Establish National Mineral Fund (NMF) out of the proceeds of the cess levied by the
Central Government
• Facilitate land acquisition process for mining projects among other things
• Encourage sustainable and scientific mining through provision for Sustainable
Development Framework (SDF).
The new Union Government would have its task cut out in initiating the entire process of
introducing and passing a new MMDR Bill.
NMP 2008 aimed to balance the needs of economic development through mining as well as
needs of protecting the forests, environment, ecology, host and indigenous populations by
ensuring all mining is undertaken within the parameters of a comprehensive Sustainable
Development Framework. The overall guiding principle shall be that a miner shall leave the
mining area in better ecological shape than originally found.
2.2.4 Sustainable Development Framework (SDF)
Sustainable Mining – Catalyst for Inclusive Economic Growth | 25
For ensuring implementation success, the SDF was designed with a strong base in the
existing laws that allow several parts of the framework to be legally enforced, and all of the
principles were mandated under the draft MMDR 2011 Bill.
Mining issues in India generated
widespread controversies internationally.
These issues span across encroachment
of forests; underpayment of government
royalties; and conflict with tribals
regarding land rights. This has also lead
to problems such as Naxalism and
distortion of Indian democracy by mixed
political and mining interests. More
recently, the mining industry has been
plagued with issues relating to rampant
illegal mining, rehabilitation of original inhabitants, adequate land compensation policy and
under declaration leading to loss to exchequer.
These increasing concerns on illegal mining in India have therefore made it imperative to
ensure the strict enforcement of mining laws. Enforcement has been identified as a key
drawback and the biggest point of criticism from all stakeholders. Hence, better
enforcement rather than more regulation can help remedy the ills plaguing the mining
sector in India. It is also crucial to take a holistic view of the current situation and analyze it
in terms of global background to arrive at a Social Equity Model to enable a sustainable
environment of development.
The Indian Mining sector has been
facing severe criticism with respect to its
contr ibution towards sustainable
development. Notably, most of the
mining activities are undertaken in the
poorest districts and very little benefit
has been passed on to the local
communities that too at the cost of
environmental degradation. Moreover,
inadequate policing and legal and
regulatory loopholes has helped illegal
mining activities flourish in the country
2.3 Governance in Mining
2.3.1 Regulating the Indian Mining Industry
26 | Sustainable Mining – Catalyst for Inclusive Economic Growth
As far as environment conservation is concerned, the process by which activities have been
undertaken by the mining sector have been questioned. The intensive use of land has laid
significant pressure on the environment which has severely compromised the quality of life
local communities. The Mines and Minerals (Regulation and Development) (MMRD) Act of
1957 and the rules framed under it have provisions to ensure environmental integrity in
mining operations however more emphasis needs to be laid on their enforcement.
In the light of current governance issues, policy changes in mining towards making policies
more sustainable and inclusive are critical. Public policy enabling inclusive sustainable
development by sharing the benefits derived from the mineral resource with the community
at large will positively affect the growth outlook of the sector.
Globally these debates have led to the drafting of
new policies which derive from the policy of
community participation and benefit sharing, as well
as ensuring that benefits of windfall profits are
shared with the society at large by taking into
account the economic rent from such activity. An
attempt to nationalize private mining companies has
proved to be unsuccessful in few countries namely 11Bolivia and South Africa. While there has been
11 Source: Wall Street Journal, April 2011
Sustainable Mining – Catalyst for Inclusive Economic Growth | 27
considerable opposition to such suggestions in those countries, the existence of these
debates and policies indicate an urgent need to address the issue of greater public
participation in the economic benefits of natural resources.
Evidently, there is a need for India to adopt policies that achieve social, economic and
environment sustainability to further thrust the growth trajectory of Mining.
The ‘Sustainability’ concept in mining is multifaceted, encompassing economic, social and
environmental aspects. Mining is critical for employment and revenue generation in many
developing nations is bolster economic sustainability. However, its negative impacts on local
communities and the environment have ushered the need for adopting mining practices
that conserve natural surroundings and promote environment sustainability. Growing
evidences have indicated the severity of the imbalance of ecosystems, posing new and
challenging risks. The problem of poverty has also been seen as inseparably linked with
global ecological problems which cannot be solved unless people have a stake in the
outcome and the resources to manage the problems.
Globally countries have been trying to put in place a mechanism to enable an environment
of socio economic growth along with development. A mechanism of sharing the benefits
which arise from resource is designed by making social commitment in form of royalty
charge payable by resource developer. An analysis of some of these policies is undertaken
below:
• Sustainable Mining Practices in Ghana: In Ghana, a minerals development fund has
been created to ensure a certain portion of government income is transferred to the
local communities directly affected by the mining activities. Moreover, companies that
apply for mining rights require conforming to a detailed recruitment and training
programme.
• Petroleum Fund in Norway: The Petroleum Fund created in Norway allows for three
quarters of current revenue to be saved for higher yields with none allotted to particular
projects or benefit sharing. This pressurises high-quality and well-governed institutions
which are involved in managing natural resources for the greater good.
• Royalty taxes in China: In support of inclusive development, China levies mainly two
royalty taxes. One is directly deposited with the national treasury and the second
named ‘mineral resource compensation fee’ which is collected by the concerned level 12
of country, provincial or city government .
2.4 Making Policies Sustainable for Inclusive Development
12 Source: China, Regulations for the Collection and Administration of the Mineral Resources Compensation Fee, N.150. 1994
28 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Understanding sustainable development
Creating organisational policies and management systems
Achieving cooperation among those with similar interests
Building capacity for effective actions at all levels
Step 1
Step 2
Step 3
Step 4
Supp
rtg
sst
aina
ble
deve
lop
ent
oin
u
m
in th
e m
iner
al s
ecto
r
• Mining receipt distribution in Indonesia: The distribution of state receipts from
natural resources entail 20% to central government and 80% to the region. This 80% is
then distributed into two parts - 64% to regencies and 16% to the provincial
government.
• Sustainable Mining initiatives in South Africa: In South Africa, mining companies are
mandated to accompany their mining rights applications with social, labour and work
programmes at the mineral development stage. The success of these programmes is
monitored through annual reports in order to ensure goals are met.
Source: International Institute for Environment and Development - www.iied.org
Figure 20: Sustainable Development in Mining
Sustainable Mining – Catalyst for Inclusive Economic Growth | 29
Format China Botswana NSW
Source: “Mining Royalties – A Global Study of their impact on Investors, Government and Civil Society” by James Otto et al
Figure 21: Summary of Royalty Practices in Selected Countries
Two Types :
üRoyalty: unit
based plus
üMineral
resources
compensati
on fee: ad
valorem
based
Brazil
Ad Valorem Ad Valorem
(NSR)
Ghana
Ad Valorem
(sales
revenue)
Ad Valorem;
but profit
based
royalty in
the
Broken
Hill
District
Queensland
Ad Valorem or
unit based
Royalty
type
(most non
constructi
on
minerals)
Ad
valorem
rate range
ü
ranges for
each
mineral,
expressed in
yuan/tonne
ore, plus
ü2: 1-4%
depending
on mineral
Various 0.2-3.0% 3-10% 3-12% 4-7% ad
valorem
2.7% of
value, or a
variable
royalty rate if
price exceeds
a reference
price
Variation
Minerals
Yes
üRanges of
unit charges
for each
mineral, plus
üAd valorem
rate for each
mineral
Yes
üAluminium
ore,
manganese,
salt,
phosphorous
: 3%
üIron, fertilizer,
coal, and
remaining
minerals: 2%
(except 3)
üPrecious
stones,
diamond,
and noble
metals: 0.2%
üGold:1%
Yes
üPrecious
stones:
10%
üPrecious
metals:
5%
üOther
minerals or
mineral
products:
3%
Yes
üPrecious
stones:
10%
üPrecious
metals:
5%
üOther
minerals or
mineral
products:
3%
Yes
üCoal:5-7%;
industrial
minerals
$A 0.35-
0.70/ tone
üOther
minerals:
4%
Yes
üMost
metallic
minerals:
2.7% of
value or a
variable
royalty
rate
üIndustrial
minerals:
$A 0.25-
1.00/ tone;
coal:7%
30 | Sustainable Mining – Catalyst for Inclusive Economic Growth
In addition to the above sustainable mining practices it is important for policy makers to
assess the taxation system under mining:
• The cumulative impact of taxes on future investments in mining need to be taken under
consideration. The overall taxation system should be globally competitive and equitable
to both the nation and the investors.
• Mining companies can play a major role in influencing Government decisions regarding
taxation. Issues including potential overall investment, closure of marginal mines and its
implications, changes to the national mineral reserve base and similar issues can be
communicated with the Government which could help them take better informed
decisions.
• Investor preferences need to be understood and foreign direct investment need to be
incentivized to attract capital inflows and differentiate India from other nations.
• Taxation systems should also enable companies to adopt sustainable mining practices
at both the community and regional level
Overall, from a macroeconomic perspective, the goals of the government should aim to
maximize the net present value of the social benefits from the mining industry in the long
run that is not only limited to Government tax receipts.
Price and
Currency
Volatility
Sharing the
Benefits
Infrastructure
Access
Capital
Projection
Execution
Capital
Allocation
and Access Margin
Protection and
Productivity
Improvement
Resource
Nationalism
Social
Licence to
Operate
Skills
Shortage
PolicyFocus
Source: YES BANK Analysis
Figure 22: Policy Focus in Mining
Sustainable Mining – Catalyst for Inclusive Economic Growth | 31
It is important to strike the right balance, if taxation is too high, investment and the tax base
will diminish as investors would move to more profitable alternatives, and if the taxation
level is too low, the nation will lose out on serving public welfare.
Similarly, it has also become imperative for the Indian mining industry to ensure long-term
economic sustainability. Local ‘Community Involvement’ has been identified critical for
‘Inclusive Growth’ as it encourages economic independence and enhances standards of
living. Infrastructure and institutions also need to be augmented to ensure that communities
are economically sustainable. This should go beyond the life-cycle of mining operations.
Moreover, all payments should be encouraged to be reflected transparently and payments
released to the society should be based on needs of stakeholders.
Environment conservation and land rehabilitation have also emerged as major areas of
concern. Environment and resource degradation, and extraction activities have disrupted the
natural environment, contaminating waterways and overall affecting biodiversity negatively.
Occupational health hazards are other aspects that need attention.
The vitality of Skill development is crucial to understand. An important mechanism to
overcome the impending challenges is improving the operational performance of mining
companies through asset management, asset utilization and optimization, shared services
approach and managing costs.
Source: http://www.miningandtheenvironment.com/res_artwork.aspx
Figure 23: Towards Sustainable Mining-Community Involvement
32 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Key production costs for mining companies comprise of stores and consumables; repairs
and maintenance; power costs; manpower and mine development. Stores and
consumables, repairs and maintenance, power and manpower costs contribute 90-95% of
mining companies’ production costs. The mining companies need to focus on the following
areas to optimize costs:
• Overall equipment effectiveness improvement
• Energy efficiency
• Manpower efficiency
• Logistics costs
• Working capital management
Besides undertaking productivity enhancement measures, the Indian Mining Industry
clearly needs to focus on developing qualified mining professionals and a skilled resource
base. India must take multiple steps to bridge the impending shortage of human capital in
mining, especially for mining engineers, diploma holders and skilled/semi-skilled labor.
Some other areas of focus include:
• Encouraging Private Sector Participation: In 1993, the National Mineral Policy did not
focus on creating equal opportunities for private sector participation. Public sector
companies were always given priority in the allocation of licenses.
• Introducing Government Concessions: The Policy did not provide for any tax
concessions for exploration expenditure or motivate companies to raise funds for
exploration.
• Delineating Laws: Several overlaps in the relative roles of the states and the centre are
observed.
• Simplifying Complex Procedures: The procedures involved in clearing mining leases
are usually quite complex and time consuming. They involve approvals from both the
state and central levels including clearances as per the MMDR Act, MCR, MCDR and
the Forests (Conservation) Act, Environment (Protection) Act.
• Ensuring Tenure Security: No fixed tenure exists between the Prospecting licenses
and Reconnaissance permits stage. The preferential right for conversion from one for to
the other did not assure an exclusive right to mine any deposit found within the area
covered under the Reconnaissance permit or the Prospecting license.
Sustainable Mining – Catalyst for Inclusive Economic Growth | 33
• Adhering to Time Limits: No fixed time limits exist for grants of permissions. The usual
time taken between applications and approvals range from six months to three or more
years.
Hence, a new integrated system of governance could fuel the sustainable development of
the industry. New guidelines and voluntary codes are critical to ensure responsible mining
practices in regions where the Government of India is unable to regulate mining activities.
The premise is that there is a need to develop a model of development which maintains a
balance between social, economic and environmental factors in order to achieve sustainable
development in the mining sector.
Sustainable Practices in Mining – Case Studies
03
A. Tourism as Model of Sustainable Development - 13‘Mining Tourism Route’, Chile
Coming 2015 Chi le is
expected to capture on the
world tourist population
with launch of ‘Mining
Tourism Route’. Aimed at
bringing the world closer to
mining through tourism, the
initiative is looking to build a
sus t a inab le mode l o f
development and economic
growth.
The mines which are
expected to open are
Chuquicamata – the largest
surface mine in the world that’s in the Antofagasta region – 1,585 kilometers
north of the nation’s capital of Santiago along with 23 other mines in the
region. Chile has abundance of both surface and underground mines in
Antofagasta, which extract various resources like sulfur and saltpeter, gold,
Sustainable Practices in Mining – Case Studies03
36 | Sustainable Mining – Catalyst for Inclusive Economic Growth
The Chuquicamata mine in northern Chile is the world's
largest surface mine and one of the main attractions on the
Mining Tourist Route, which will be launched in 2015.
13 Source: Corporación Nacional del Cobre, Chile
lithium. All these would form part of the Mining Tourist Route which is expected to open in
2015. There are in total 19 large mining, 20 medium-sized, 540 small mines and 100 micro-
mines developments in the Antofagasta region.
An initial public-private investment of $33 million Chilean pesos (about US$58,000),
provided by the National Fund for Regional Development (FNDR) and mining companies,
was allocated for the Mining Route last year.
During the Mining tour, visitors would be exposed to various mining activities and
processes which would help them develop more informed knowledge about mining
activities and its impact. This would enable corporate to demonstrate the work they are
undertaking to people in general. Along with promoting Mining tourism in the region the
tourists would be encouraged to visit the Los Flamencos National Reserve or a vineyard in
the district of Toconao in the San Pedro de Atacama, about 340 kilometers from
Antofagasta. Route, created by the Antofagasta Regional Branch of the National Tourism
Service (Sernatur) in collaboration with mining companies and the Regional Ministerial
Secretariat for Mining.
The lifecycle of a mine can span decades
and even generations.
PT Newmont Minahasa Raya’s (PTNMR)
support to Tourism at Lakban Beach in
Indonesia is one example of creating a
sustainable environment involving local
communities beginning with exploration and continuing well after the mine closure.
In 1996, PTNMR began gold mining production at the Mesel Gold Mine in North Sulawesi.
By the year 2004 all mining and processing activity at Mesel had ended; most closure
activities were finished in 2006; and closure monitoring was completed in 2010. Even post
completion, PTNMR continued to fulfill a number of obligations under the Contract of Work
(CoW) with the Government of Indonesia.
B. Building a Tourism Eco System for development - PT Newmont Minahasa Raya (PTNMR),
14Indonesia
Sustainable Mining – Catalyst for Inclusive Economic Growth | 37
PT Newmont Minahasa Raya Supports Tourism
at Lakban Beach in Indonesia
14 Source: http://www.newmont.com/our-voice/post/study-sustainable-development-after-mine-closure
38 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Tourism Model: Reef Restoration
Tourism as a tool for sustained
development was the key activity
area undertaken by PTNMR.
Reefballs were donated by PT
Newmont Minahasa Raya in Buyat
Bay to stimulate reef growth and
support diving tourism. PTNMR also
e n a b l e d a n d f u n d e d t h e
construction of the largest artificial
coral reef program undertaken by a
private company, which included
more than 3,000 reef balls to be
deployed in Buyat Bay and Totok Bay. Support was received from the Tourism Office of
South Minahasa in order to undertake mapping of existing coral reefs in both bays more
than a decade ago. This enabled in increasing fish stock in the region, reducing reef loss,
which enabled in developing and sustaining livelihoods of local fishermen. These activities
helped over the years in creating an environment where underwater tourism in the region
was highlighted and promoted.
Agro forestry activities: PTNMR promoted agro forestry related activities by ensuring that
the reclaimed land was redeveloped as a forest area. For this purpose the company
delivered nearly 450 hectares of reclaimed mine area to the Government of Indonesia. This
area is now a secondary forest which provides high-value species such as mahogany, teak,
nyatoh and sengon to the economy of the region. This reclamation exercise has ensured
long-term sustainable economic benefit for the region and has ensured maintenance of
ecological balance in the region.
Other Initiatives: To help reduce the fishermen’s costs and improve efficiencies and
product quality, PTNMR built a much-needed cold-storage and ice block factory in the
location formerly used as the mine’s port.
Measuring Success
PTNMR’s work with Buyat, Ratatotok and the surrounding communities is an example of
sustainable practice in mining which has enabled economic and social development of the
region from a long term perspective. Through this type of collaborative approach to
development, the company aims long-term economic, environmental and social
sustainability for our local communities.
Reefballs donated by PT Newmont Minahasa Raya in Buyat Bay
stimulate reef growth and support diving tourism
Sustainable Mining – Catalyst for Inclusive Economic Growth | 39
C. Reclamation of Mined out land - Sesa Goa’s Sanquelim 15mine, India
One of the important activities for sustainability involves reclamation and rehabilitation of
mined out and degraded land
A project in this direction has been undertaken by Sesa Goa for rehabilitation of mined out
or degraded land, in their Sanquelime mines (106 out of 203 hectares) in Mauliguem Village
of Bicholin taluka in North Goa. The mining operations were started in 1960 by Sesa Goa
and with the exhaustion of resource the mine got closed in 1988. At present no mining
activity is in operation in this area. This site has been completely reclaimed by now
Eco Tourism Spot: The sustainable
practices for converting the region
into an Ecotourism spot has set a
benchmark for other min ing
companies all over the country to
follow. All the best practices in
rec lamat ion, agr i -hort icu l tura l
approach, water body development,
pisciculture and development of
medicinal plants garden, have been
adopted. Exhausted mining pit has
been converted to a pond for
pisciculture and horticulture species
of the Goan region (cashew, mango,
coconut, jackfruit etc.) have been grown on waste dumps along with spice plantations and
medicinal plants.
Eco Tourism Spot: 106 hectares converted into a model reclaimed mine.
15 Source: Sustainable Development Report by Institute for Studies in Industrial Development
Nakshatra Devata Udyan is based on the 27
Constellations (Nakshatras).
40 | Sustainable Mining – Catalyst for Inclusive Economic Growth
These are irrigated by rainwater harvested in the mining pits. Athletic facilities like
playgrounds, football academies and even a technical/industrial training schools have been
established on the reclaimed land.
Social Development Work: Apart from developing the mined out land, the company is
using the developed mine infrastructure for various social development works after the
closure of mine. The foundation has established the Sesa Technical School and two football
academies on the reclaimed mined-out area in Sanquelin. The students passing out of the
technical school are specialist in the field of machinists, instrumentation, electricians and
instrument mechanic, and are finding placements in large corporate both Indian and multi-
national.
Engagement with communities is an
ongoing and long-term process,
wh ich needs to t ake p l ace
throughout the life of a mining
project. Xstrata Coal, a mining
company has put in place a vineyard
monitoring program for its Bulga
Coal mine region. The coal mine
location is in the Hunter Valley, New
South Wales, known to be one of
Aust ra l i a ’s best -known wine
producing regions. In the mid-1990s,
Xstrata applied for coal exploration licenses to investigate an area beneath 40 commercial
vineyards and near a significant local watercourse.
Early on in the mining project the company
ensured that communication with local
people was established to allay any fear
and concern. Mining under operational
vineyards was a first for Australia, and local
residents expressed concerns about the
potential impact on local viticulture and
water resources.
Xstrata used collaborative approach and
formed a specific project team and a
community consultation committee. Taking
D. Community Engagement: Xstrata Coal, New South Wales, Australia
Xstrata Coal environment & Community manager
with Wines grower
Trial being done above the former South Bulga Colliery
Sustainable Mining – Catalyst for Inclusive Economic Growth | 41
inputs from the community, academics and consultants, Xstrata using the demonstrative
approach constructed a simulated vineyard over the existing South Bulga underground mine,
to assess the impacts of subsidence on the vineyard infrastructure. It kept stakeholders
regularly updated on the progress of viticulture trials. Xstrata then established a
comprehensive consultation program for the ongoing management of the mine.
Grapes used in Hunter Valley wines are growing above Glencore Xstrata’s Beltana No 1 mine,
which is one of Australia’s most productive underground coal mines. Glencore Xstrata has
been mining successfully under about 90 ha of vineyards since 2005. Seven vintages have
been produced since mining began, with little or no impact on the quality of grapes
produced, and the vineyards produce up to 250 000 bottles of wine a year.
The importance of preserving culture and heritage has gained momentum in the recent past
with focus towards retaining the old art and form of the same. This has been viewed as
common thread which binds the community together.
Since the early days of the mining operation, social impact assessment studies in the region
had expressed concerns by community leaders about the need to strengthen and preserve
Lihirian culture.
Located on the largest island of Lihir
Group of Islands in Papua New
Guinea, the L ih i r go ld mine
commenced operation in 1995. The
operations were owned by Lihir
Management Company (LMC), a
wholly owned subsidiary of Rio Tinto.
Later in 2005 Lihir Gold Limited
(LGL) assumed ownership and
management of the same and which
was later merged into Newcrest
Mining Limited.
Efforts have been made by the
mining company in the region to preserve and promote cultural heritage by undertaking local
cultural programs, which included the establishment of a cultural awareness office within the
company’s community relations department. Lihir Gold limited supported Lihirian cultural
heritage plan (2008), an initiative of group of committed Lihirians, together with a support
16E. Preserving cultural heritage: Lihir Mines, Papua New Guinea
16 Source: Department of Resources, Energy and Tourism & Austrade
An elderly of the tribe standing beside Kabelbel Canoe
on day of Launch of Lihir Cultural Heritage plan
42 | Sustainable Mining – Catalyst for Inclusive Economic Growth
team comprising an anthropologist, an historian, an ethnomusicologist and a heritage
specialist. The group held meetings and workshops with locals to develop the plan. This
plan was also given the Lihirian title: A irir wana mamalien a anio Lir, which means ‘A plan
for social stability and harmony on Lihir’ (see Bainton et al 2011).
The company undertook documentation of major sacred sites and cultural practices and
organised various cultural festivals. A Lihir-wide representative cultural heritage committee
was established to undertake these activities. In mid-2009, an island-wide workshop was
held to enable the committee to develop a draft cultural heritage management plan (CHMP)
aligned to internationally recognised heritage standards. CHMP created the association
which has since completed a number of projects in the area of cultural heritage leading to
harmony and development at the same time.
The baux i te min ing p ro jec t
undertaken by Aloca in the Juruti
region of Brazil has been receiving
accolades for setting new standard
and benchmark for sustainable
development affecting positively the
social and economic conditions in
the local community and enhancing
environmental conditions.
The region is inhabited by 47,000
people, with 65% of them living in
around 150 rural communities. The
economy has traditionally been
dependent on fishing, cattle-raising, Brazil nut extraction, and subsistence agriculture.
The project was started in 2009, involved in extraction of bauxite being evacuated by port
along the Amazon River, and a rail port connectivity of 55-kilometer for transportation of
bauxite from the mine to the port.
Alcoa launched its sustainable program for the region under the program known as the
“Sustainable Juruti Program”. The program is a proposed model for mining and local
development in the Amazon, and is primarily based on three sustainability principles:
respect for the environment, social responsibility, and economic success. The concurrent
implementation of (i) a Council, (ii) Development Metrics, and (iii) a Development Fund is
F. Setting sustainability benchmark - Juruti Mining Project, Brazil
Juruti Mines at Brazil – Setting newer standards in mining
Sustainable Mining – Catalyst for Inclusive Economic Growth | 43
unique to Alcoa and to the Amazon region, although the concept is now being applied to
some of the other mega-projects in this region, notably being hydro projects along the
Madeira River.
Alcoa's approach to educate residents about the project and solicits their input was the key
in changing opinion in favor and providing the organization with right inputs. To further this
principle Alcoa conducted two opinion surveys, held three public meetings attended by
almost 8,000 people and almost 70 additional meetings with community members, and
implemented a far-reaching communications program. Alcoa also conducted extensive
surveys, studies, and field research. The Sustainable Juruti Council (CONJUS), was
established in 2008, to serve as the key channel for dialogue between civil society, the
company and the public authorities and brings together three representatives from the
private sector, three representatives of Government institutions, and nine representatives
from civil society. This form of council served as a basis of collaborative dialogue and helped
the company build on the needs of the community.
In 2010, a public opinion poll conducted by IBOPE indicated that 91% of the population in
the municipality viewed the installation of Alcoa’s new bauxite mine as a positive way.
Alcoa’s approach to the Juruti project motivated Conservation International to say, “Alcoa is
raising the bar quite high and is creating hopefully a new model of how mining projects can
be established in Amazonia without creating new waves of deforestation in the region.”
Exame business magazine in November, 2010, recognized Alcoa, as Brazil’s Most
Sustainable Company, primarily for its initiatives related to the Juruti Bauxite Mine.
Rio Tinto developed had in 2003 set
an internal water standard for
setting out minimum expectations
for water management to be
unde r t aken a t each o f i t s
operations. Rio Tinto has used a
“catchment approach” to water
management, which encompasses
all water resources in the region
surrounding the area of operation.
Argyle Diamond Mine is the world’s
l a rges t s ing le p roduce r o f
G. Water Management - Argyle Diamond mine, Rio Tinto, Australia
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2005 2006 2007 2008 2009 2010 2011
Figure 24: Lake Argyle Water Consumption
Water consumption (kiloliters)
Source: International Council on Mining and Minerals Report on Water Management in mining dated May 2012
44 | Sustainable Mining – Catalyst for Inclusive Economic Growth
diamonds, producing approximately 30 million carats each year – one-fifth of the world’s
natural diamond production
The mine had a consumption of more than 3,500 megalitres from Lake Argyle to run its
operations in 2005. The target was set to reduce the use to zero over period of time. The
processing plant at the site was the biggest user of water, where water is used to wash and
separate the diamonds. Earlier water from the process was being discharged into the
environment, however since then the water is now been captured and recycled back
through the processing plant, achieving a recovery rate of 40% in recycling. Water seepage
from tailings is also captured and recycled for use in the process. Dewatering of the
underground mine and from the surface pit operation provides additional water that is
collected and stored in the two dams for drinking and operational use.
By introducing these changes to water usage in the mine, Argyle has achieved a 95% drop
in water taken from Lake Argyle since 2005, and by 2009 the use of water from the lake
was reduced to 300 megalitres.
Mining Industry - Key Challenges
04
• Regulatory factors:
Mining in India suffers from lack of co-ordination between different Center and
State Governments. Among various solutions proposed is the formation of a
single-window system with participation of all Ministries / Agencies to get
things moving and boost investor confidence.
The industry is also characterized by lack of transparency in decision-making
resulting in delays in approvals, extensions, clearances, etc. Common
examples affecting the Mining industry include uncertainty in getting the next
Mining Industry- Key Challenges 04
46 | Sustainable Mining – Catalyst for Inclusive Economic Growth
stage of mining concession (RP to PL or PL to ML) or extension of mining concession in a
time-bound manner. Similarly, lack of transparency and flawed process in allotment of
mining blocks opened the full Coal mining sector to an unprecedented judiciary overhaul
and cancellation of multiple coal blocks previously allotted by the Government. These
developments completely affected these Mining projects and associated downstream
projects in the core industries (e.g. Power, Cement, Steel, etc).
Inspite of having robust legal framework, absence of a strong body to oversee meant large-
scale illegal mining causing environmental imbalance forcing the Supreme Court to clamp
down mining completely in Karnataka and Goa. Lackadaisical approach in law enforcement
induced decision-making paralysis in parts/regions of the government machinery. It is
important to put in place a time-bound place, a time-bound plan to penalize errant miners,
monitor mining closely.
The industry has earned a bad reputation for sharing gains of Mining inadequately with the
local community and PAPs leading to difficulties in land acquisition. Unclear terms and
procedures for rehabilitation of PAPs, also pose a hindrance in getting clearances for
acquisition of land for mining projects. Further, land acquisition has been bottleneck
instances involving Forest Land (under purview of MoEF) due to inconsistent application of
Forest Laws.
Mining has resulted in environment violations viz., encroachment of forest land,
disappearance of flora, fauna and green-belts, violation of the annual permissible mining
quantity, etc.
The industry needs to rectify and address the environment and sustainablity issue by
adopting a balanced approach to Mining while also protecting the needs of forests,
environment, and ecology. Implementation of the SDF, first proposed in NMP 2008 and
subsequently provided for in the now lapsed Draft MMDR 2011 Bill, would help the industry
significantly in striking ecological balance.
• Negligence in enforcement of laws
• Community involvement and land acquisition
• Environment and Sustainability
Sustainable Mining – Catalyst for Inclusive Economic Growth | 47
48 | Sustainable Mining – Catalyst for Inclusive Economic Growth
• Under-developed evacuation infrastructure
• Insufficient Geological and Exploration Expenditure
Majority of India’s mineral deposits are located in Eastern and Central India.
Construction of railways and roads connecting these regions to consumption centers or
augmentation of Port infrastructure has been stuck for years because of insufficient
investments, delays in approvals and domestic insurgencies, etc. The Government
needs to invest in evacuation infrastructure to ensure optimum utilization of its mineral
wealth and reduce dependence on non-critical imports.
17India has lot of Mineral Resources, but accounts for only 0.5% of the global
exploration spend (compared to 19% and 12% by Canada and Australia respectively).
Also, exploration spend per square km in India is one of the lowest among the major
mining economies and exploration is mostly restricted to a depth of 50 to 100 metre
vs. as deep as 300 metre in countries such as Australia, South Africa and Canada. This
has acted as a deterrent for potential investors/ mining companies seen by way of
absence of large-scale involvement of Junior Exploration companies. Resultantly, little
of India’s vast mineral resources have been converted into mineral reserves.
To encourage Geological and Exploration spend, some of the best practices seen in
exploration focused countries like Australia, Canada need to be studied and
implemented in India (e.g. Flow through Shares as a financing tool for Exploration,
Mining rights seen as property rights and hence easily transferable, etc).
17 Source - Metals Economic Group website and 'Mining India: Sustainability for Growth, Ernst & Young'
Sustainable Mining – Catalyst for Inclusive Economic Growth | 49
A flow-through share (FTS) is a share, or the right to buy a share, of the stock of a mineral
resource company where tax deductions "flow through" from the company to the investor. A
flow-through share is issued under a written agreement between a corporation and an
individual. Under the agreement, the individual agrees to pay for the shares, and the
corporation agrees to transfer certain mining expenditures to the individual. Flow-through
shares were originally introduced to address an exploration financing inequity which arose
between major and junior exploration companies. Flow-through share investors can deduct
their investments from otherwise taxable income. Due to this feature – FTS have helped
funding exploration activities in Canada
The mining sector in India hasn’t reinvented itself in terms of technology. Availability and use
of high technology equipment is still below potential. According to a study, Coal India, the
largest Coal miner in the world produces 1,100 tonnes of Coal per employee annually. The
same metric is 36,700 tonnes for US’s Peabody Energy and 12,700 tonnes for China’s 18
Shenhua Energy . Inadequacy of investments in R&D has been a key reason for the
technology gap. Adoption of world class technology, equipment with latest emission norms
will result in numerous benefits like increased productivity, higher safety standards and
sustainable mining practices.
India lacks skilled human capital in mining as demand for engineers, diploma holders and
skilled/semi-skilled labour is expected to create shortfall equivalent to half the supply by Year
2025. To prevent this, significant investment in enhancing the human capital pool would be
required.
• Shortage of Technology and Human Capital
18 Source: PWC Report (2013)
50 | Sustainable Mining – Catalyst for Inclusive Economic Growth
• Insufficient Foreign investment in Mining
• Funding issues
The industry has been unable to benefit from foreign investment allowed under the
100% FDI automatic route. Part of the problem lies in the difficulties / failures
encountered by early foreign entrants (viz., Posco, Vale, Arcelor Mittal, etc) which
sought to invest in the Exploitation stage of the Mining value chain.
To win back the confidence of foreign investors, the domestic industry needs to
communicate the investment attractiveness of all components of the value chain
(including Geo-surveys, Exploration, Mining services, End-use processing) which can
benefit from foreign technology, skills and expertise through JVs, technology transfer,
etc.
The mining industry is capex intensive with high lead times. Resulting in high interest
costs. Further, regulatory hurdles hurt prospects of mining companies & this reflects in
fall in bank borrowings. There is thus need for financial support from banks/financial
institutions/ government agencies which would offer soft loans to mining companies,
manufacturers of mining equipment, contractors etc. Also, raising funds for exploration
activities in India is difficult as there are very few options available to raise requisite
funds for risky ventures.
Social Equity Model of Development– Sustainable growth in Mining
05
The long term model of sustainable development encompasses measures and
platform to build a cohesive and synergetic structure bringing together various
stakeholders in the value chain.
The Social Equity Model follows an integrated approach to development
involving the private developer, community, NGO's, Governmental
organizations, Financier and Knowledge Bank in formation of SPVs during
exploration or mining processes. The model is based on a cooperative
approach to development. Such partnerships provide a platform for fruitful
collaborative partnerships, and also create a strong knowledge base that
pushes sustained development and ensures social equity in the growth
strategies. Partnerships involving Govt./Pvt Sector/ NGOs can assist in giving a
larger/ global perspective to local problems
This social equity approach aims to holistically include the local community as
a partner, and is an enabler of development linkages with the rural and
semiurban communities. With inclusive development as an objective the
model takes into account the objectives of all the stakeholders involved in the
project.
Under this model, a special purpose vehicle is formed with equity from a
promoter, private investors and social equity from the local community in the
form of land allocation and local support. Government agencies and NGOs
provide the necessary support with respect to fiscal concessions and
Social Equity Model of Development– Sustainable growth in Mining05
52 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Sustainable Mining – Catalyst for Inclusive Economic Growth | 53
facilitating the formation of synergetic partnerships between the local communities and
promoters of the project. The management of the project is by the promoter and the
involvement of local community also ensures sustainability of the project due to creation
of employment and added revenue for the community. This is a self sustaining
cooperative model of development where the local community involvement leads to the
creation of social equity.
The figure below gives the synergetic and transactional relationships between various
stakeholders in the process.
• Knowledge Based Partnership
• Sustainable Practices
• Facilitators
• Synergetic Partnerships
• Environmental protection
• Preserving heritage and culture
• Employment
• Livelihood
• Collaborative approach
• Preserving heritage and culture
• Sustainable best practice
• Sustainable Model Financing
• Responsible Lending practice
• Platform for Voice
• Knowledge based inputs
• Cooperative model of
Development
• Institutional Mechanism
• Showcase / replication of
Established model.
• Platform for future knowledge
initiatives
• Advisory
• Knowledge
Partnership
• Risk Capital
• Private Sector Efficiency
• Support and inputs
• Responsible Development
• Sustainable practices
• Policy Regulations
• Govt Facilitation
• Fiscal Concessions / Social
Equity investment.
• Policy Research
• Good Governance practices
• Social Equity approach
• Structuring, Social Equity based
inclusive devt.
• Advisory
• PPP implementation
• Return on Capital
• Profit• Contribute Resources in form
or Land and Labor
• Structured Participation in
management (cooperatives /
producer
Debt / Equity
Interest/Profit
Knowledge Bank
Government/Inter government
organization
Entrepreneur /
Company
Financiers / Investors
NGO(s)
Figure 25: The Social Equity Model
Source: YES BANK Analysis
54 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Eco System Approach
1. Knowledge Bank – Private Player – Mining SPV
2. Knowledge Bank – Government – Mining SPV
3. Knowledge Bank – NGO- Community – Mining SPV
Collaborative Community Structures: How They Help Foster Inclusive Growth
Developmental Partnerships
The model follows an eco system approach where sustainability of the entire eco system is
built upon smaller ecosystems which contribute to the synergetic alignment of the entire
chain. Various sub ecosystems and their inter linkages are explained below
The private player brings risk capital for developing resources which along with efficiency in
operation is expected to provide adequate return on capital in terms of profitability and
positive payback from investments. The Knowledge Bank provides the private players,
knowledge advisory in terms of various sustainable development practices and good
governance practices which promote and facilitate responsible mining operations being
carried out for various stakeholders in the Eco system.
The Government forms policies and regulations within which mining companies operate.
These policies form the broad framework of operation and adherence to the same is
required to carry out mining activities by the SPV. The Knowledge Bank through its policy
focused research provides inputs with regards to various sustainable best practice and
good governance which can be adopted at the policy level to bring about a change in the
current mining activities enabling a comprehensive socio economic development.
The Knowledge Bank using its Social equity approach for development brings Communities
and NGOs within the Value chain of development thereby ensuring the sustenance of eco
systems. The knowledge bank through its cooperative model of development provides
inputs to NGOs and Communities too. Building on this collaborative community model of
development, the community provides inputs to the Mining SPV in terms of land and labor
in return for structured participation in management and adoption of sustainable
development practices for preservation of heritage and culture.
• Multi Stakeholder response to local challenges as an effective tool for sustainability.
• Capacity Building and cooperative structures 'enable' communities to manage and
solve their issues themselves
Sustainable Mining – Catalyst for Inclusive Economic Growth | 55
• Such partnerships provide a platform for fruitful collaborative partnerships, and also
create a strong knowledge base that pushes skill development and ensures social
equity in the growth strategies. Partnerships with Govt./Pvt Sector/ NGOs assist in
giving a larger/ global perspective to local problems
• Policy Framework: Institutional innovation to consolidate structures that guide
communities and entrepreneurs
• Facilitates an equal voice for all stakeholders, thereby observing their interests and
making mining activities sustainable in the long run.
• ‘Real’ Ownership: Align aspirations and foster ownership/responsibility for common
purpose/goals
• Provide platforms, skills and opportunities for communication
Stakeholder Alignment
Way Forward
06
Sustainability has always been at the forefront of the Mining Industry. It has
major implications on overall development of rural communities including
upliftment through involvement in mining activities. Maintaining this socio-
economic balance has therefore attained a monumental position for equitable
growth of an economy. The three sustainability facets shaping sustainable
mining practices include – Environment, Social and Economic aspects (the
triple bottom line). The following points highlight areas critical to thrust the
industry an its growth trajectory.
Way Forward06
58 | Sustainable Mining – Catalyst for Inclusive Economic Growth
Mining impacts the environment as well as the socio-economic set-up. Therefore, minimizing the adverse impacts and optimizing the benefits from mining to the community becomes critical for creation of Sustainable Development Framework (SDF)
Sustainable Mining – Catalyst for Inclusive Economic Growth | 59
• Adopting an integrated approach for development in Mining– ‘The Social Equity Model’
• Enhancing Policy/Regulatory framework
The Indian mining industry has been characterized by a moderately cohesive and
synergetic structure that lacks the required environment. This is where the Social Equity
Model becomes vital for long term sustainability. The cooperative approach towards
development could encourage social equity in growth strategies promote strategic
collaborations with infrastructure players and investors.
Given the untapped potential of mining in the country, current mining policies must be
aligned to attract foreign investments and operations. It has been observed, that State
governments are usually inclined to reserve potential areas to Public Sector Units in 19
grants of mineral concessions . These reservations prevent private sector from entering
these areas and conducting exploration activities. It is critical that policies focus on
promoting private sector involvement and Improving rail and port services through modes
of Public Private Partnerships (PPPs).
Figure 26: Sustainable Development Facets
Source: YES BANK Analysis
19 Source: Development of the Indian Mining Industry–Way Forward, FICCI Mines and Minerals Division. October 2013
60 | Sustainable Mining – Catalyst for Inclusive Economic Growth
• Boost Mineral exploration and efficiency of Mining activities
• Incentivize investments in Mining and rationalization of Taxes
20With an estimation of 5.71 lakh square kilometers of Obvious Geological Potential area in
India, the government must focus on allocating funds towards exploration and
development activities. Despite this immense potential India spends only a fraction of its
GDP on exploration and does not exploit its innate potential. This is clearly indicative of the
insufficient implementation of GSI recommendations and lack of policies supporting
mandatory exploration for mines and incentivizing green field exploration. Attracting global
investments in exploration could provide the required impetus as current players lack the
required technology, skill set, efficiency and operational agility to exploit mineral exploration
to its maximum.
The Indian Mining sector is undoubtedly one on the highest taxed sectors in the world with
its effective tax nearing 45% vis-a-vis other countries like Australia (39%), Canada (35%), 21China (32%) and Russia (35%) . The current tax policies extort value rather than attract
investments in the mining sector. As per the current draft, the MMDR Bill 2011 levies
additional taxes and duties leading to the effective tax nearing 60%. Which would further
burden the sector and inhibit its growth. There is hence a pressing need for policy makers
to adopt tax reforms and introduce incentives/concessions that India a competitive position
in the global mining space.
20 Source: http://mines.nic.in/writereaddata%5CContentlinks%5C3e370e6d5bf34a11b7badb248ed812e3.pdf21 Source: http://www.ficci.com/spdocument/20317/Mining-Industry.pdf
Sustainable Mining – Catalyst for Inclusive Economic Growth | 61
• Encourage transparency and regulatory certainty
• Single Window/Provisions for speedy clearances
• Benefits sharing can trigger inclusive growth
Despite having 100% FDI, the mining industry is yet to receive significant capital
inflows from foreign players. Even in terms of investment environment, India is ranked
low under the ‘attractiveness of Government mining policies’ criterion. Clearly, policy
makers need to focus on providing an enabling environment that encourages
transparency. To encourage potential investors additionally, there is a need to clearly
define regulations around new concessions and mining operations. Although the rising
demand for metals globally tends to drive investor interests, the uncertainty aspect
draws them away from investing. Therefore it is critical for the Government to realize
the importance of regulation certainty to investments in the sector.
Currently, mineral policies of each state in India diverge from each other and vary in
terms of grants of mineral concessions. The provisions under the Forest (Conservation)
Act 1980 need to be reviewed to encourage detailed prospecting and exploration for
mineral investigation, Further prospecting activities should be excused from forest
clearances as long as no degradation is being caused by the activity. Single window
clearances should also be introduced to expedite approval processes and increase
efficiency through reduced costs and time involved.
A very critical aspect of
s u s t a i n a b l e m i n i n g
encompasses the need to
share mining benefits with the
community. For long term
sustainability, there is an
u r g i n g n e e d f o r t h e
government to propose an
economic model that aligns
stakeholders’ expectations
with sustainable profit sharing
ratios. Sharing profits with the
local communities tends to
facilitate benefits to trickle
down to the grassroot level. Mining companies should also be responsible for
augmenting infrastructure and basic amenities in these regions.
The Federation of Indian Mineral Industries (FIMI), which came into existence with a small
membership of about 40 federating associations and individual units, is now a 350-member
body. FIMI envelopes in its fold mining, mineral processing, metal making, cement and
other mineral-derived industries as well as granite, stone, marble and slate industries —
private, joint and public sectors — of the country. It represents the entire non-fuel mining
and mineral processing activities of the nation. FIMI's main objective is to establish a
vibrant, environmentally benign mineral industry (explorative, extractive and processing
activities related to minerals) that meets the mineral needs of the nation from the existing
resource endowment, import the mineral and metals that are scarce or absent, and export
the surplus minerals and metals that have an external market without prejudice to
domestic needs. FIMI is persuading official implementing agencies to bring out the
necessary changes in procedures to avoid delays in order to harmonize the policy and
practice in the mining industry.
YES BANK, India's fourth largest private sector Bank, is the outcome of the professional &
entrepreneurial commitment of its Founder, Rana Kapoor and his top management team,
to establish a high quality, customer centric, service driven, private Indian Bank catering to
the future businesses of India. YES BANK has adopted international best practices, the
highest standards of service quality and operational excellence, and offers comprehensive
banking and financial solutions to all its valued customers.
YES BANK has a knowledge driven approach to banking, and a superior customer
experience for its retail, corporate and emerging corporate banking clients. YES BANK is
steadily evolving as the Professionals' Bank of India with the vision of “Building the Best
Quality Bank of the World in India” by 2020.
NOTES