Exim Bank | 09 Jun, 2008
The growth momentum in the Indian mineral sector, in the last few years, due to the growing worldwide demand for minerals, could be sustained through a comprehensive exploration policy to unearth the largely unexplored mineral wealth of the country, says an Exim Bank study.

The study is of the view that India, being a country with large landmass, has the potential to have more proven mineral reserves.

However, the exploration activity is required to be intensified with a suitable incentive framework in order to attract private sector and foreign investment. Mineral Exploration Tax Credit, which is being provided in Canada, is worth consideration to attract much needed exploration oriented investment in the Indian mineral sector.

The study also proposes to strengthen the State mineral development corporations to finance mining and exploration related activities.

India today is the third largest producer of chromium ores, with a share of 18% in world production. It is the fourth largest producer of iron ore (10% share); fifth largest producer of manganese ore (7% share); and sixth largest producer of bauxite, zinc, and titanium (with share of 7%, 5% and 5%, respectively).

Exports of ores and minerals from India have grown from US $ 917 million in 1999-2000 to US $ 7028 million in 2006-07, a CAGR of 34%. Iron ore contributes much of the growth witnessed in export of ores and minerals. Iron ore is the largest exported minerals from India accounting for 55% of total export of ores and minerals from India.

Other major ores exported from India include zinc ores (5%), chromium ores (2.5%), aluminium ores (2.3%), lead ores (1.4%), and titanium ores (0.6%).

The study observes that India's exports have largely been confined to only iron-ore. It would be strategic to consider diversification of its export basket and focus on other minerals that have a longer life index or have a larger reserve-base.

This would not only help the country to have a diversified export portfolio but also avoid depletion of specific ores that may be critical for the development of the country in the years to come. There is also a need to diversify the markets while diversifying the export basket.

The boom in the mining sector is not a temporary one but would continue. Thus, the players in this sector need to increase their investments in exploration activities and make the mining activity as a composite business and not a stand-alone business.

Once exploration is given a greater emphasis in the business models, mining would become a lucrative activity with an increasing volume of proven mineral reserves for value addition and exports.