India: a new star for mining entrepreneurs? Part two

By Jeames McKibben, Manish Garg and Michelle Clarke of Xstract Mining Consultants

 However, despite a similar geological setting, shared grounding in British statutory and business frameworks and Australia’s reputation as “roaming investors”, the level of Australian investment in India’s mining industry remains minimal.

To read the first part of this story click here.

India plans to meet its growing demand for energy by installing new coal fired thermal power stations. It is currently the world’s third largest coal producer; it has very large reserves which are currently underdeveloped; and it plans to service its power industry by expending domestic production of coal rather than importing coal.
Coal demand is forecast to increase at a rate of 9.7 per cent per annum for next five years.
Coal India Limited is unable to keep pace with the forecast demand increase. To accelerate coal production and satisfy growing demand from power generators and steel producers, the Government had allocated 208 coal blocks to “captive” users. These were allocated equally between public and private sector companies.
A key issue concerning Government is that, to date only 24 of the allocated blocks have been brought into production. Indian end users have recently been in Australia looking for technical assistance in the development and operation of coal mines to support their core business.
Previous experience has shown that patience and persistence is required to operate within India. Certainly many of the majors mining houses have experienced India’s frustrations first hand, with several withdrawing from the country after periods of around four to five years, whilst those that persisted have been granted access to some of India’s more highly mineralised areas.
To encourage greater international investment and technology transfer in its minerals sector, the Indian Government implemented a new Mineral Policy in 2008, which provides numerous concessions to investors including tax holidays, deductions and exemptions, as well as allowing for 100 per cent Foreign Direct Investment (FDI) and up to 100 per cent foreign equity holdings for both mining and exploration (exceptions for nuclear minerals and coal). At the same time as providing a number of corporate incentives, the 2008 Mineral Policy is also aimed at reducing red-tape and promoting joint ventures with overseas players. It also aims to create employment within the industry which currently employs 1.1 million people. The enabling legislation is allowing a significant increase in private participation especially in coal sector.
Whilst India’s mining sector still faces some formidable hurdles, recent private sector initiatives and foreign investment in major mining projects are slowly bringing change.
Certainly with more than 85 billion tonnes of mineral reserves remaining to be exploited, India presents an attractive, albeit challenging, environment for international mineral producers and explorers - a point which is likely to spur international mining entrepreneurs, and no doubt some Australian companies, into action.

To read the first part of this story click here.

* Written by Jeames McKibben with input from Marnish Garg and Michelle Clarke - from Xstract Group, a team of specialist mining consultants.
For more information email: jmckibben@xstractgroup.com or visit: www.xstractgroup.com