INDIA’S MINING POLICY

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Context: The Parliament passed the Mines and Minerals (Development and Regulation) Amendment Bill 2023 to allow private players to participate in the exploration and mining of minerals, which were previously reserved for government-owned entities under the Atomic Energy Act 1962.

Details

• The government has taken a major step to boost the private sector's role in exploring and mining critical and strategic minerals in India. Recently, the Parliament of India passed the Mines and Minerals (Development and Regulation) Amendment Bill, 2023, which reclassifies six minerals, including lithium, as critical and strategic minerals. Lithium is a key component of electric vehicle batteries and other energy storage solutions.
• The Bill allows private players to participate in the exploration and mining of these six minerals, which were previously reserved for government-owned entities under the Atomic Energy Act The Bill aims to enhance India's self-reliance and competitiveness in the global market for these minerals, which are essential for various emerging technologies and industries.

India's import dependency

• India's import dependency on critical and deep-seated minerals is significant, which poses challenges to its manufacturing, infrastructure, and clean energy goals. The country's reliance on imports for these essential minerals can make supply chains vulnerable to disruptions, leading to potential shortages and price spikes.
• Lithium: India is 100% import-dependent on countries like China, Russia, Australia, South Africa, and the U.S. for the supply of lithium. Lithium is a crucial element for battery technologies used in electric vehicles and energy storage systems, both of which play a vital role in India's clean energy transition.
• Cobalt: Similar to lithium, India relies heavily on imports for cobalt, with China being a significant source. Cobalt is essential for lithium-ion batteries and various high-tech industries.
• Nickel: India also imports a significant amount of nickel, which is used in stainless steel production, batteries, and other industries.
• Rare Earth Elements (REEs): While India possesses some rare earth reserves; it only produces a small fraction of global output. China is the dominant producer of REEs, which are crucial for various advanced technologies, including clean energy technologies like wind turbines and solar panels.
• Copper: India imports a substantial amount of copper, which is essential for electrical wiring, electronics, and various industrial applications.
• Other Minerals: India's import dependency extends to other deep-seated minerals like gold, silver, zinc, lead, platinum group elements (PGEs), and more. These minerals are essential for various industries, including manufacturing, electronics, and infrastructure development.

Addressing this import dependency is crucial for India's sustainable development and security. To mitigate these challenges, India could consider the following strategies:

• Domestic Exploration and Mining: Invest in domestic exploration and mining of critical minerals to reduce import reliance. This may involve improving mining technologies, regulatory frameworks, and infrastructure.
• Recycling and Circular Economy: Promote the recycling of minerals from electronic waste and spent batteries to recover valuable resources and reduce the need for new raw material extraction.
• Diversification of Suppliers: Identify alternative sources of critical minerals and diversify import partners to reduce supply chain vulnerabilities.
• Technology and Innovation: Invest in research and innovation to develop alternative technologies that use fewer critical minerals or substitute them with more readily available materials.
• Bilateral and Multilateral Agreements: Collaborate with countries through bilateral and multilateral agreements to secure a stable supply of critical minerals and strengthen supply chain resilience.
• Capacity Building: Develop domestic expertise and capabilities in mineral exploration, extraction, processing, and recycling to enhance self-reliance.
• Incentives and Policies: Implement policies that encourage domestic production, exploration, and processing of critical minerals, such as offering incentives and streamlining regulatory processes.

By adopting a comprehensive approach that encompasses exploration, technology development, policy support, and international collaboration, India can work towards reducing its import dependency on critical and deep-seated minerals and ensuring a more secure and sustainable supply of these essential resources.

Key Provisions of Mines and Minerals Bill 2023

• Expansion of Mineral Exploration: The Bill omits several atomic minerals from the list of minerals that cannot be commercially mined, allowing private entities to explore and mine them. This expansion of permissible minerals opens up opportunities for private players in the exploration and mining of minerals like lithium, beryllium, niobium, titanium, tantalum, and zirconium that were previously reserved for government entities.
• Reconnaissance Activities: The Bill permits activities such as pitting, trenching, drilling, and sub-surface excavation as part of reconnaissance. This change allows private players to engage in mapping, surveys, and preliminary exploration activities, enabling them to better assess mineral potential.
• New Exploration License (EL): The Bill introduces a new type of license, the Exploration License (EL), aimed at encouraging private-sector participation in exploration. This license is granted for a period of five years (extendable by two years) through competitive bidding conducted by state governments. Private explorers can bid for a desired percentage share of the auction premium, which will eventually be paid by mining lease holders upon successful exploration. This mechanism incentivizes efficient and effective exploration.
• Coverage of Critical Minerals: The EL will be issued for 29 minerals specified in the Seventh Schedule of the amended Act, including critical, strategic, and deep-seated minerals. This inclusion of critical minerals recognizes their importance for various industries and national security.
• Maximum Exploration Area: The Bill specifies a maximum exploration area of up to 1,000 square kilometres under a single exploration license. This provision ensures that exploration activities are efficient while allowing private players adequate space for meaningful exploration.
• Area Retention: Private licensees are allowed to retain up to 25% of the originally authorized area after the first three years, subject to submitting a report to the state government outlining reasons for area retention. This flexibility accommodates practical considerations and encourages continued exploration efforts.
• Central Government Auctions: While most auctions are reserved for state governments, the Bill reserves the conduct of auctions for composite licenses and mining leases for specified critical and strategic minerals for the central government. This central oversight ensures transparent and fair allocation of mining rights for minerals of national importance.

Overall, the Mines and Minerals Bill 2023 introduces provisions that aim to attract private sector participation by providing a conducive framework for mineral exploration and development. It seeks to balance the interests of private players with those of the state and central governments, ensuring responsible and sustainable mineral resource management.

Significance of private sector participation in the exploration of critical and deep-seated minerals

• Expertise and Innovation: Private companies often bring specialized technical expertise and innovative approaches to mineral exploration. They invest in advanced exploration techniques, technologies, and methodologies that can lead to more efficient and effective discovery of mineral resources.
• Risk Sharing: Exploration is a high-risk endeavour with uncertain outcomes. Private sector participation allows for risk-sharing between the government and private entities. Private companies are willing to take on the financial risks associated with exploration, which may lead to more exploration projects being initiated and a higher likelihood of discovering economically viable mineral deposits.
• Accelerated Exploration: Private companies, often referred to as junior explorers, have the flexibility and incentive to accelerate exploration efforts. Their focus on quick and efficient project development can lead to a higher number of exploration projects, increasing the chances of discovering new mineral deposits.
• Increased Investment: Private sector involvement attracts investment from various sources, including venture capital, private equity, and exploration-focused funds. This infusion of funds can lead to larger exploration budgets, enabling more extensive and in-depth exploration activities.
• Resource Multiplication: Private exploration firms can multiply the number of exploration projects compared to government agencies alone. This diversification increases the likelihood of discovering valuable mineral resources across different geographic regions.
• Reduced Burden on Government: Engaging the private sector in mineral exploration reduces the financial burden on government agencies, allowing them to allocate resources to other critical areas while benefiting from private sector investments.
• Efficient Resource Allocation: Private companies typically allocate resources based on market demand and economic viability. This market-driven approach can lead to the discovery of minerals that are in high demand and align with the country's industrial and technological needs.
• Technology Transfer and Capacity Building: Private sector participation facilitates technology transfer from experienced explorers to local professionals, enhancing domestic capacity and knowledge in mineral exploration.
• Competition and Collaboration: Private sector participation fosters healthy competition among exploration firms, encouraging them to innovate and adopt best practices. Collaboration between government agencies and private firms can lead to synergies and knowledge sharing.
• Job Creation and Economic Growth: Exploration activities create jobs and stimulate local economies. Private sector involvement can lead to increased employment opportunities and economic development in regions with potential mineral resources.

By allowing private companies to engage in mineral exploration, India can tap into their expertise, resources, and risk-taking capabilities to accelerate the discovery of critical minerals. This can play a significant role in supporting the country's manufacturing, infrastructure, clean energy transition, and overall economic growth.

Must-Read Articles:

DEEP SEA MINING: https://www.iasgyan.in/daily-current-affairs/deep-sea-mining-31

Critical Minerals: https://www.iasgyan.in/daily-current-affairs/critical-minerals

CRITICAL MINERALS FOR INDIA: https://www.iasgyan.in/daily-current-affairs/critical-minerals-for-india

MINERAL DISTRIBUTION IN INDIA: https://www.iasgyan.in/blogs/mineral-distribution-in-india

PRACTICE QUESTION Q. What is the impact of opening up mining to private sector participation? How does private sector involvement influence the mining industry, and what benefits such as investment and technological advancement does it bring? Conversely, what challenges, like environmental concerns and community engagement, can arise from private sector engagement? Looking ahead, what strategies can be employed to ensure responsible and sustainable private sector participation in mining while addressing these challenges?

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