India Mining Industry Update Quarter 1 2012

  • November 2013
  • -
  • Business Monitor International
  • -
  • 95 pages

India hosts a wide range of globally significant mineral resources, including four fuel minerals (such as coal and uranium), 11 metallic minerals (such as iron), 22 minor minerals and 52 non-metallic minerals (such as clay). The country ranks among the world's top five nations for its core competency commodity reserves of coal and iron ore. Iron ore reserves are estimated in the region of 23bnt (bn tonnes) and account for 6% of global reserves, while coal reserves are reported to be around 255bnt. India is the world's third-largest producer of coal, fourth-largest producer of iron ore and the fifth-largest producer of bauxite. However, only 10% of the country's landmass has been explored due primarily to significant regulation and bureaucratic obstacles.
India's mining market looks set to post average annual growth of 5.1% in real terms from 2011 to 2015 to reach US Dollar 79.6bn at the end of the period, as output of key minerals looks set to grow in the coming years. However, growth in 2012 and beyond will continue to be curtailed by India's poor operating environment. A bright spot, however, is the increasing number of Indian industry players venturing overseas to secure stable, long-term supplies of minerals such as coal and iron ore in a bid to meet fast-rising domestic demand.
India's regulatory environment is prohibitive for investors although recently proposed legislation is a step in the right direction. In the past, mining permits/licences are issued contingent on success in the reconnaissance phase. This practice exposes companies to high levels of risk. However, the proposed 2011 Mines and Minerals Development and Regulation (MMDR) Bill allows for the granting of nonexclusive reconnaissance licences and high-technology reconnaissance/exploration licences based on ability and intention to develop an area. The new bill also calls for a system for bidding licences, which can create a industry for these licences, increasing transparency. A negative for the proposed MMDR Bill will be the additional taxes to be levied for community development.
India's mining segment is highly stratified. There are a number of giant, mostly state-owned mines that have an outsized effect on total output and at the same time there are a large number of small and inefficient mines, many of them illegal. According to Austrade, 5% of operating mines in India produce about 50% of the country's mineral output. Given the segment 's strategic and economic importance, there is significant government involvement, with the segment dominated by state-owned industry players or Public Segment Undertakings (PSUs) such as National Aluminium Corp (NALCO), SAIL, National Mineral Development Corp (NMDC) and Coal India. Indeed, according to the United States Geological Survey, PSUs contribute about 85% of India's total value of mineral production and are the main producers of key commodities such as coal, iron ore, aluminium, copper and gold.

Table Of Contents

Executive Summary . 5
SWOTS . 6
India Political Environment and Risk Analysis .. 6
India Economic Environment and Risk Analysis 6
India Business Environment SWOT . 7
World Mining Outlook 8
Data : Recent Tax Increases . 11
Data : Largest Coal Projects 12
Data : Frontier Mining Projects . 13
Industry Trends And Developments 14
Data : India's Mining Segment - Value And Production, from 2008 to 2015 . 15

Environment Overview 16
Mining Business Environment Ratings. 16
Data : Asia Mining Business Environment Ratings .. 16
India’s Business Environment .. 19
Data : BMI’s Business And Operation Risk Ratings . 20
Data : BMI’s Legal Framework Rating .. 21
Data : Labour Force Quality 25
Data : Annual Foreign Direct Investment Into Asia, from 2006 to 2008 . 28
Data : BMI’s Trade And Investment Ratings 29
Data : India’s Top Export Destinations, from 2003 to 2009 (US$mn) .. 30
Political Outlook .. 32

Market Projection s Scenario . 35
Lead .. 35
Data : Major Projects .. 36
Data : India’s Lead Production, from 2008 to 2015 . 36
Zinc 37
Data : Major Projects And Key Expansion Plans .. 38
Data : India’s Zinc Production, from 2008 to 2015 .. 38
Uranium .. 38
Data : India’s Uranium Production, from 2008 to 2015 . 40
Coal .. 41
Data : India’s Coal Production from 2008 to 2015 .. 44
Bauxite . 45
Data : India's Bauxite Production, from 2008 to 2015 48
Iron Ore .. 48
Data : Key Iron Ore Expansion Plans . 49
Data : India's Iron Ore Production, from 2008 to 2015 . 51
Regulatory Development . 52
Data : Key Changes In Licence/Lease Granting In The 2011 MMDR .. 54
Data : Current Royalty Rates And Changes Of Proposed Mining Bill .. 55

Competition Overview .. 57
Company Profiles 59
Hindustan Copper .. 59
Vedanta Resources . 61
Coal India .. 63
NMDC . 65
Commodity Strategy - Metals Update . 67
Gold .. 67
Copper . 67
Aluminium.. 68
Lead .. 69
Nickel 70
Tin.. 70
Zinc 71
World Assumptions . 73
Data : World Assumptions, from 2009 to 2015 .. 73
Data : World And Regional Real Gross Domestic Product Growth, from 2010 to 2013 (% y-o-y) 74
Data : Selected Developed Industry Exchange Rates, from 2010 to 2013 (average) 74
Data : Selected Emerging Industry Exchange Rates, from 2010 to 2013 (average) . 75
Developed States . 75
Data : Developed States Real Gross Domestic Product Growth Projections, from 2010 to 2013 (% y-o-y) .. 76
Emerging Industries . 77
Data : Emerging Industries Real Gross Domestic Product Growth Projections, from 2010 to 2013 (% y-o-y) 77
Consensus .. 78
Data : Real Gross Domestic Product Growth Consensus Projections, from 2011 to 2012 (%chg y-o-y) . 78

Environment Overview Ratings Methodology 79
Data : Mining Business Environment Indicators 80
Data : Weighting Of Components .. 81

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