India being a part of Gondwanaland, is richly endowed with mineral wealth such as coal, iron, mica, aluminium etc., however, mining sector of India contributes only 2.2% to 2.5% to the GDP of the country. Reasons for low contribution are as under:
- Minerals are located in forested tribal areas. Democratic polity with a mandate for welfare creates conflicting priority of mineral exploitation and tribal development.
- Multiple clearances and Legal hurdles: The mining sector ails from the requirement of multiple clearances, which makes the sector unviable/unprofitable. For example, Environmental/forest clearances. The mining sector is also susceptible to various legal pronouncements. For example, SC judgement on coal block allocation affected coal mining output.
- High levies: Mining sector in India is subjected to much higher levies than other mining geographies. For example, high royalties, double taxation etc.
- Poor exploration: Highly restricted licensing regimes, disincentivises private players to indulge in mineral exploration.
- Monopoly of PSUs: Mining sector suffers from problem of unproductive usage of assets, due to monopoly of PSUs. For example, coal India’s monopoly in coal sector.
- Slow modernisation: India’s mining sector has been slow in adopting productive global trends. For example, smart mines etc.
The mining sector of India, hold immense potential to reduce import dependence and hurl industrial development. In this light faster administrative clearances need to be ensured and security challenges like Naxalism etc., in the mining belt need to be checked.