Investment is Must in Exploration of Natural Resources to Eradicate Poverty & Unemployment

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By Anil Agarwal

India has enough potential to produce worth USD 400-500 billion in natural resources like oil & gas, gold, silver, iron ore, copper, coal, calcium, rock phosphate and others. It is bound to generate substantial revenues, more than 50%, for the government, which will be helpful in developing infrastructure for the country. This will also create employment for 10-15 crore people, by way of setting-up over 1000s of new Large, medium and small scale industries towards processing of natural resource. GDP will improve, deficit will reduce and a win-win situation for all. Investment in exploration is must for our future generation. The model may be revenue sharing or whoever pays higher Royalty.

The natural resource sector has been passing through a challenging phase in India. Blanket bans and clearances delays have brought this sector in a non-sustainable position today. Even with abundance of rich mineral reserves and resources, we are not able to capitalize it for our economic strength.

The history is evident, not every country has rich mineral resources, and the countries blessed with such natural resources have utilized them for their overall growth, for the development of people, securing employment and their livelihood, eradication of poverty and stabilizing their economies.

At one point, countries like Brazil, Canada, Australia and those in Latin America were on par with India when it came to utilization of natural resources. Today, these countries have moved far ahead and we have remained stagnant. In India, the fall of GDP growth can be attributed largely to the sluggish growth of natural resource sector.

On one side, the available resources are not being utilized and on the other side, the tussle of legitimate and illegitimate mining has put blanket bans on mining. The outcome has crippled the industries, economies of these States and livelihood source of millions of people.

One of the most sought after global mineral resource, bauxite – a raw material for making aluminium, still remains un-explored and un-utilized in India. Our country is blessed with 4th largest rich bauxite deposit in the world, about 3000 million tonnes, but unfortunately the country has not witnessed opening of any large bauxite mine in the last more than 35 years. Investments in exploration of Gold and copper mines are awaiting, in spite of the Supreme Court judgment to open up the sector.

Having our own reserves and resources, and than spending billions on their import makes no sense. We can keep these reserves for another 100 years, but ultimately, their sustainable and optimum utilization is necessary for the country and for the mankind.

Look at the economic condition of a State where manufacturing has seen blanket ban.

Iron Ore mining ban in Goa has put the Goa economy in deep economic crisis. In Goa, it is a matter of survival for over one-third of the state’s population. The iron ore mining ban has paralyzed almost 20,000 trucks. But the biggest loss is to the economy which is now touching over Rs. 25,000 crore.

The livelihood of over 100,000 people is at stake. Even if the mining starts today, it would still lead at least 40,000 jobless. Thousands of people are employed in mining operations which include regular and contract employees. All are sitting idle. It is not just a loss to the miner; even thousands of ancillary industries associated with iron ore mining are on verge of closure.

The Goa Chief Minister too shared his concern that ‘the economy of the country is in doldrums because import-export balance of the country is disturbed. Restriction on iron ore mining can be attributed as major reason for decline of the economy.’

Until mining bans came into force, India produced about 200 million tonnes of iron ore and about 50% was exported, making India the world’s 3rd largest exporter of iron ore. The ban has declined the export from 117 million tonnes in 2008-09 to 18 million tonnes in 2012-13. The condition of exports is further deteriorating, to 14-15 million tonnes, in current financial year.

The exports have been so much dented and the loss of revenues has been so massive, that, once the mining resumes in Goa, the companies will be required to go full-fledged and increase as much iron ore production to recover as much possible lost ground.

The loss of over $6 billion on account of the ban on iron ore export from Goa alone has been one of the major factors responsible for compounding the current rupee crisis.

The situation is so critical that Goa Government has approached the Central Government for relief. In a written reply to the Lok Sabha on 6th December 2013, the Mines Minister Mr. Dinsha Patel stated that State Government of Goa, citing the economic hardships and loss of employment due to the ban on mining in the State of Goa, has requested the Central Government for (1) enhanced central financial assistance, (2) special relief package to the cooperative banks so that they do not become sick, and (3) a moratorium on repayment of borrowings from banks, waiver of interest and restructuring of loan packages.

No one advocates for illegitimate mining but the legitimate mining must grow. Don’t curb legitimate mining. Investments are necessary in exploration and development of natural resources to eradicate poverty and unemployment.

When Goa mining delegation met Prime Minister and asked for help, the PM said, ‘while environmental concerns should be sincerely addressed, all should remember that poverty is the greatest polluter’. Union Finance Minister Mr. P. Chidambaram statement on iron ore mining ‘to find a way to export iron ore and restart iron ore mining’ also gave solace to people. Union Minister of Commerce and Industry, Mr. Anand Sharma too spoke on removing the ban by stating that ‘we don’t want ban to continue and all mining activities are not illegal’ and stressed upon iron ore export.

Amidst all this, the entire economy of Goa has shaken up. The entire economic lifecycle has come to a stand still. Paralysis in iron ore mining in Goa is hurting industries and people sentiments.

India enjoys the richness of iron ore reserves like that of Australia and Brazil but the difference in production and outlook is un-measurable. Where Australia has doubled its production to 500 million tonnes and Brazil has too doubled its production to 400 million tonnes, India production has gone down to less than 50% to 100 million tonnes, and even struggling to sustain this level, though our country has the immense potential to produce much more.

For a developing nation like India, it is only pertinent to capitalize the available natural resource, in most sustainable manner, by bringing in large investments and through simplification of policies and procedures. This is the only sector that has true potential to make India an economic powerhouse.

(Anil Agarwal is the Chairman of Vedanta Group. )

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