How India Plans to Exploit the Full Potential of Its Mining Sector

Many countries and their economies alike have been adversely affected by the coronavirus pandemic. Countries like India plan to use this disruption to lead their economy into a rapid industrialization phase. The ace up their sleeve is the mining sector, which will be the main driver to economic recovery in a post-pandemic world.

Usually, a 1% growth in the mining sector leads to an average 1.3% increase in the industrial production growth rate while 10 indirect jobs are created from 1 direct job. According to the 12th five-year plan of the Planning Commission of India, for every 1% rise in economic growth, the country’s mining sector generates 6 times more employment than the manufacturing sector and 13 times more job opportunities than the agricultural sector. To achieve this, serious interventions are needed in the mining sector.

The National Mineral Policy (“NMP”), which was revised last year, outlines how the Ministry of Mines encourages large scale investments with the newest technologies in prospecting and mining. By relaxing FDI rules (Foreign Direct Investment), the national mineral policy aimed for substantial investments and also developing mineral exportation strategy for the long-term would help establish the mining sector as an independent industry. Incentivizing exploration is also recommended by the NMP as a way to attract private investments.

Recently, the government allowed up to 100% FDI, with a few exceptions and also permitted commercial mining in the coal sector. This is expected to bring in more investments for the mining sector. However, it is important to realize that opening up FDI doesn’t automatically mean that huge investments are going to be flowing in. To improve the investment environment, inefficient clearance procedures and regulatory restrictions have to be addressed. Only then will the ease of doing business increase, leading to an inflow of investments.

The Ministry of Coal is helping to do just that, by developing a Single Window Clearance Mechanism, which is essentially a quicker way for online applications to be processed and approved. This move into the digital network will help make it easier to carry out business in India by allowing assignees of coal mines to secure approvals in a well-timed manner, which will allow mines to begin their operations sooner.

Despite the government’s move to open the mining sector in India under the stimulus reforms that were recently announced, the sector still has a lot unexploited potential which can be harnessed by implementing suggestions that work towards removing regulatory restrictions.

It would be interesting to see what companies like Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) think about the suitability of the measures planned to fully exploit mining in India.

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