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* Jharkhand News *
<http://jharkhand.org.in/>
*Managing the economics of minerals *
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At long last, proactive reforms seem in the offing for the minerals
and mining sector, after years of policy dithering and plain inaction. The
Cabinet has reportedly okayed the revamped national mineral policy, so as to
fast-forward policy change. What's envisaged is independent oversight, more
realistic ad valorem royalty rates, and, generally speaking, a rule-based
policy regime.
High time, really. A transparent investment environment in mining and
minerals would actively coagulate funds, with huge payoffs right across the
board. The policy objective needs to be to overcome the large investment
backlog in minerals and mining, vouch for sustainable development and move
towards market-determined domestic ore prices.
The value of mineral production, other than petroleum and natural gas, was
estimated at Rs 30,675 crore for 2000-2001, going by official figures. But
the real value would clearly be far higher, given the panoply of distortions
in the mineral economy. There's also much potential as well. India, after
all, is "endowed with significant mineral resources." We produce 85 minerals
at the last count, including 11 metallic and 52 non-metallic extracts.
However, the fact remains that there is much under-investment in mining
capacity and productivity levels here remain much too low, seen against
global norms.
It is in this context that proactive policy makes perfect sense. Note that
the long-run availability of mineral resources is fundamentally a geological
and technical issue. But the short-to-medium-term reliability of supplies is
primarily an economic and political issue. Besides, in the here and now we
are no longer seeing stagnating demand, surplus capacity, and inevitably
falling mineral and metal prices over the secular period, as happened in the
late 1980s and 1990s. In-stead, there's surprisingly large and continuing
growth in demand for most minerals and metals. Hence the real prospects for
an extended period of relative hardening of sectoral prices.
The policy framework does need to explicitly consider minerals as wealth. We
do need to junk the extant system of rock-low royalty rates, which remain
unrevised for years. Minerals, after all, have considerable potential to
create well being. The way ahead is to mine and develop mineral resources
that are technically appropriate and environmentally sound. Also, the entire
process needs to be fair to all "stakeholders," including those affected by
mining.
As for "sustainability," the fact remains that mineral wealth needs to be
created before it can be sustained. Undeveloped mineral resources represent
no more than potential wealth. And even if mining itself is not quite
sustainable at a specific location, the economic benefits can certainly be
made wholly self-sustaining, with proper policy design.
The point is that a non-renewable mineral resource can be made into a
completely renewable resource, by diverting a portion of mining revenues for
investing in human capital, and social and physical in-frastructure. Which
is why the move to levy ad valorem royalty, cess and other levies, of rates
linked to ore value, is not a day too soon. In any case, for development to
be sustainable, wealth—broadly defined to include both natural and
human—ought to surely increase.
Fortunately, income-poor states like Orissa, Jharkhand and Chhattisgarh are
well endowed with mineral resources. What's needed is political consensus to
concretise long-pending investment proposals and end the dither. It's been
going on for years.
The mineral policy now in the works needs to streamline the process of
approvals for reconnaissance, exploration and on to grant of mining lease,
in reasonable time. We cannot continue with the present ground reality of
constant delays and everyday opacity in minerals.
The overhaul of mineral mining norms in the offing is billed to include
institutional mechanism for independent oversight and dispute resolution,
when it comes to policy follow through. In tandem, what's required is
well-drafted legislation and sound legal provisions for investor comfort.
Otherwise, a panoply of litigation and long-winded court procedures may put
a spanner in the works, in minerals and metals.
It's not farfetched to say that the world will never really run out of
non-renewable resources. This is partly due to the fact that metals like
aluminium and steel are 100% recyclable. But more importantly, long before
the last tonne of bauxite or ferrous ore is extracted from the earth's
crust, demand would doubtless fall to zero.
The standard models in mineral economics do suggest sharp rise in production
costs as high quality, low-cost deposits are exhausted. Concurrently, new
technology would likely shift demand toward cheaper substitutes.
Given the distinct economics of minerals, the long-run trends in prices,
production costs, or other societal measures of the costs involved in
obtaining an extra unit of a mineral resource do provide better indicators
of availability. Instead of endlessly worrying about resource depletion and
on best husbanding ores, we need to mine, value-add and industrialise with
renewed gusto.
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*Jharkhand Minerals @
jharkhand-minerals.blogspot.com<http://www.jharkhand-minerals.blogspot.com/>
*
http://www.jharkhand-minerals.blogspot.com/
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Jharkhand News
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