India Mining Report Q2 2008

Two traditional steel making rivals, Steel Authority of India Ltd (SAIL) and Tata Steel, said in January they were linking up to jointly develop coal mining projects to meet their rapidly rising needs for coking coal. They said they were forming a 50:50 joint venture company to identify, acquire, and develop coal fields in India. Four coal blocks in the eastern state of Jharkand, with reserves of around 600mn metric tonnes were already being evaluated, the two companies said. Both SAIL and Tata have been boosting steel output and therefore finding a consequent surge in coking coal requirements.

India is home to a myriad of metals and minerals. Globally, the country is the largest producer of sheet mica, the third-largest producer of coal, fourth-largest producer of iron ore and the fifth-largest producer of bauxite. Besides these natural resources, India also hosts significant reserves of copper, zinc, gold and about 26 other metallic and minor minerals. The Indian mining sector is largely state-dominated, but the government is now seeking a phased withdrawal of its participation from the non-strategic metal sector, in order to encourage private players to take the centre stage.

India's economic prospects and rich geology have long captured the interest of foreign companies.

However, the presence of foreign mining firms whose investments would help upgrade the Indian mining-related technology is low. A new and much anticipated mining policy is on the horizon. It seeks to ease excessive bureaucratic influences while issuing or transferring mining leases and permits. The policy also aims to encourage domestic and overseas players to invest in the exploration of precious metals. In addition, the government is taking active steps to encourage foreign investment in the mining industry, with the investment target for 2007-2009 pegged at US$22.37bn.

Non-uniformity of rules and regulations across the country characterises Indian mining laws. The Indian states hold the sole licensing authority for most minerals, except for iron ore and uranium, which require prior consent from the central government. States can also create their own qualifying conditions and most of them hold discretionary powers to terminate a mining lease, or to take ownership of a mine on grounds of non-performance, or environmental or labour-related reasons.

Industry Forecast The pace of new exploration initiatives in the Indian mining industry has been rather slow - often as a result of excessive paperwork and confusing regulations. The new mining policy is expected to address these gaps in the industry and encourage private players to go beyond exploring traditional minerals to fully leverage the richly endowed natural diversity of the country. According to BMI, the country's mining industry is forecast to log an average growth of 8.1% over 2008-2012, to be valued at US$74.6bn by 2012.