National Mineral Index to make mining sector competitive

The introduction of the National Mineral Index will help the mining sector to become competitive and inviting healthy competition in auctions and active participation by smaller mining companies.

As part of the steps by the Union Government to introduce slew of legislative reforms in coal and mining sector, the National Mineral Index will capture details from all price sources such as captive and non-captive mines.

This methodology just as in coal will reflect the true and useful value of the minerals and will boost the attractiveness of the Indian mining sector.

A just and uniform system for development of National Mineral Index for all minerals can go a long way in ensuring a competitive mining sector inviting healthy competition in auctions and active participation by smaller mining companies.

The decision to open the coal sector for commercial mining, implementation of National Coal Index and commencement of the auction process of commercial coal blocks can transform the mining sector.

This can help the country save around Rs 80,000 crores per year on account of coal import by augmenting production in the country. In addition, the auctions are likely to generate a healthy revenue stream and create multiple livelihood opportunities.

Mining sector can benefit from timely implementation of the already announced mining sector reforms. This include introduction of single stage seamless auction of Exploration cum Mining cum Production regime which is key to attracting best-in-class technology providers from around the globe for partnering and investing in India with a surety of getting the right to produce once the discovery is established.

India fulfils 60 per cent of its aluminium demand from imports even when the domestic production capacity of 4.1 Million Tons is over and above the national requirement of 4 Million Ton. This can be changed by improving competitiveness of domestic aluminium manufacturers.

A competitive domestic aluminium sector will save annual forex outgo of around Rs 40,000 crores. In addition, it will attract fresh investment of Rs 1.8 lakh crores ($ 25 billion) into the growing aluminium sector where demand is expected to double to 8-10 million tons in next 5 years.

With abundant reserves of bauxite & coal India has the potential to be self-sufficient, competitive and be the global alternative to China. In this direction, decision to allow joint auction of bauxite and coal can boost aluminium sector.

The efficacy of the tabulation of Average Sale Price of a mineral has been questioned time and again. In spite of Mineral Concession Rules providing for basic principles, the methodology of tabulation has been always been observed as that of a narrow one.

In this context, formation of National Mineral Index (NMI) in line with the National Coal Index could be one of the most historic reforms for this sector.

National Coal Index has provided the fundamentals wherein transactions from all channels are properly captured and principals of periodic publication (every 2 months) allow all the bidders to bid judiciously with a transparent process in place clearly defining the mineral valuation, extent of revenue share and subsequent payment of Royalty and other taxes.

Acknowledging the nature & consumption of the Indian Coal, which is different from the Global consumption pattern, the National Coal Index has refrained from linking it to international indices.

Development of the National Mineral Index by including prices from captive and non-captive mines etc. as done for all the channels in Coal (Regulated & Unregulated) can provide a one stop solution to a number of concerns.

Sources said it will help in resolving difficulties faced by miners and states in the auction of limestone and bauxite (Metal-Grade) blocks, resolve concerns of royalty as done in Coal Index where prices considered are independent of Royalty, DMF, NMET and other taxes.

It also shall provide a benchmark solution to current ambiguities in the ASP (Average Sales Price) system and prevent illegal mining. Royalty, and other taxes can also be streamlined with introduction of the National Mineral Index.

The mining sector is poised to play a crucial role in the revival of the economy. The changing market scenario and operation dynamics require extensive mining reforms to overcome this situation and turbocharge the economy.

National Coal Index has brought much needed transparency and efficiency to coal mining. It is felt that it is high time to introduce National Mineral Index for expeditious implementation of the mining reforms and accelerated unlocking of the nation’s mining potential which is vital to making India self-reliant.