Boston, MA -- (ReleaseWire) -- 03/14/2014 -- India's mining industry will continue to be characterised by regulatory and bureaucratic hurdles, while corruption will stifle growth in an already poor operating sector. We forecast the country's mining industry to reach a value of US$55.4bn in 2018, growing at an average rate of 7.5% per annum.
Despite the rich deposits of mineral wealth on offer, we believe growth in India's mining industry will remain curtailed by its poor operating environment. We forecast the country's mining industry to reach a value of US$55.4bn in 2018, growing at an average rate of 7.5% per annum. This compares with an average growth rate of 14.3% per annum over the past decade.
India has a wide range of globally significant mineral resources, ranking among the world's top five countries for its core competency commodity reserves of coal and iron ore. Iron ore reserves are estimated in the region of 23bn tonnes (bnt) and account for 6% of global reserves, while coal reserves are reported to be around 286bnt. Indeed, 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 regulatory and bureaucratic hurdles.
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Although the 2011 Mines and Mineral Development and Regulation (MMDR) bill seeks to improve transparency and the legislative environment, in order to attract investment, but we believe the pervasiveness of corruption and regulatory and bureaucratic obstacles will continue to prevent mining companies from achieving their full production capacity. In the past mining permits/licences were issued contingent on success in the reconnaissance phase. This exposes firms to high levels of risk. However, the MMDR bill would allow the granting of non-exclusive reconnaissance licences and high-tech reconnaissance/exploration licences based on ability and intention to develop an area. Mining companies would be required to submit and display all data pertaining to the granting, extension, termination and planning of operations in the public domain.
The bill also calls for a system for bidding licences, which would greatly heighten transparency in the sector. The current system of 'first-come, first-served' in distributing natural resources for development is fraught with potential conflicts of interest and can be easily abused by officials. As of April 2012 the government decided still to distribute natural resource assets in this manner, despite a Supreme Court ruling stating that all national resources must be distributed only through auction.
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