Just owning mineral resources in a country is not a guarantee its prosperity, unless we make productive use and generate income from these resources. We have shackled mineral sector with multiple regulations. Judicial interventions curbing production have added fuel to the fire. Central audit objection has stalled sanctioning of new mining leases & coal blocks. Oil & Gas sector could not gear up despite large potentiality. In the process, we have crafted an artificial mineral shortage despite having sufficient deposits. This mineral shortage has caused abnormal price rise of minerals those are essential inputs for core sectors of India. Production cost of all basic goods has gone up and its impact has traversed through the entire economy.
Modern economy is heavily dependent on manufactured goods and primary source of energy i.e. Coal & Petroleum. We are converting India into a high cost economy centre by inviting Cost-push Inflation & Trade Deficit. We must unleash these regulatory shackles in order to boost production, improve efficiency and bring down cost of minerals & primary energy by all means.
Closed mines must re-open to increase supply & soften prices. All approvals must be expedited and time should be granted for pending compliances, if any. Once leases are granted, then we should not restrict mining operation on plea of forest or tribal land. We can’t afford losing mineral wealth below the ground. Rather, there should be restrictions on using mineral bearing land for other purposes. Land acquisition process of the lease area should be smooth & quick. After the easement, we must ensure that all such mines should start production. If any mining company is not serious towards the development, then we can transfer the lease or rope to other partners. But, we must not allow hoarding or idling of mineral assets. Even a PSU owned mines should not be an exception to this.
Till late 1990s, most of the mining companies were bleeding owing to low prices & limited market. Captive mines & PSU owned merchant mines were major producers. After 2001, we witnessed industrial growth at a rate of 12-15% for the first time in India. This lifted the demand for minerals & metallic ores in particular, since metals are basic input for any manufactured product. Merchant mines could not match their production with demand. Approvals of mining plans & Environment Clearance for higher production were principal obstacles. Poor connectivity of mining belt was another big constraint in despatching higher quantum of minerals.
All these problems cumulatively, caused abnormal mineral shortage and price rise in minerals. The impact on Iron ore & Coal was significant due to large additional capacity in Steel & Power sector. High prices and super profits of mining companies attracted everybody’s attention and the matter was highly politicised. Media also created hype in the name of mining scam. Judicial commission was constituted. Regulatory & Judicial activisms were at their historical peak.
Tough scrutiny was done under magnifying glass. New interpretations of law were invented with an only motto of fault finding, penalising and closing mining operation. Any non-compliance, big or small, present or the past were equated with illegal mining and theft. Even the PSUs were not spared. Scrutiny was extended to all other laws, besides mining laws. Even the excess production was equated to illegal mining & theft. The result was, many Iron ore mines were closed down and the shortage aggravated. Coal sector also faced similar situation due to publicity of Coal Scam. Pro-active role of investigating agencies in economic affairs added fuel to fire. These investigations resulted in closure & idling of many Steel & Power plants. We started importing Steel, Iron ore & Coal. One large Aluminium plant was also closed down for dearth of Bauxite ore. The price of base metals like Steel & Aluminium started rising. Power cost also touched a historic high. Shortage & poor quality of coal multiplied problems. The impact was felt by the entire economy giving invitation to Inflation & Trade Deficit. Mining entered into a negative growth territory and the manufacturing growth was nearly zero. This dragged the country’s overall growth and we entered into Stagflation-like situation. Export was slowing down and import was rising. Rupee exceeded level of INR 65/- per USD.