A Sector at a Crossroads
In December 2024, significant developments in the Indian mining sector made headlines. On one hand, India reiterated its intent to establish a national mission to secure critical and strategic minerals, while on the other, recent developments are causing concern to the mining sector as well as the downstream investments being planned to leverage India’s geological richness. The recent Supreme Court judgement allows State Governments to levy tax on mineral-bearing land with retrospective effect in addition to the royalty and other charges being paid. Some states have now started acting on it. This creates conditions where businesses are rethinking the cost of doing business in mining and downstream industries. Given the magnitude of investment required to set up downstream facilities, these uncertainties in input costs make it more and more difficult to fund investment decisions at a time when private sector investment is critical to get the economy to a higher growth trajectory. These contrasting moves highlight the pivotal juncture at which the sector stands, underscoring the need to ensure it pivots in the right direction.
While reforms have driven transparency and growth, unpredictable policy shifts can quickly undermine progress.
Reforms Unlock Revenue Growth
The 2015 amendment to the Mines and Minerals (Development and Regulation) Act (MMDR) marked a turning point, introducing transparent auction processes that enhanced efficiency and significantly increased government revenues.
Between 2015 and 2023, 442 mineral blocks—including high-value resources like limestone, iron ore, and bauxite—were auctioned across 11 states. Odisha, Madhya Pradesh, Karnataka, and Rajasthan set benchmarks for implementing these reforms.
The results have been transformative. National revenues from mining surged from ₹10,000 crore annually before 2015 to ₹65,000 crore in FY 2023-24. In Odisha in FY 2023-24, despite having only 24 operational auctioned blocks, the state earned in excess of ₹36,000 crore in auction premiums and royalty, compared to only royalty collection of ₹17,959 crore.
These financial gains showcase the potential for other mineral-rich states to replicate this success, boosting revenues, attracting investments, and generating jobs. By 2047, the mining sector is projected to contribute $500 billion to GDP and create 25 million direct and indirect jobs, playing a vital role in India’s ambition to become a $30 trillion economy.
Meeting the Challenges of a New Era
India’s mining sector is now confronting emerging challenges and opportunities, particularly the growing demand for critical minerals like lithium, cobalt, nickel, and rare earth elements. These minerals are vital for the global energy transition, powering electric vehicles (EVs), renewable energy technologies, and advanced manufacturing. Securing a stable supply of these resources will be key to India’s self-reliance and net-zero goals.
The International Energy Agency (IEA) highlights that EVs require six times more minerals than conventional vehicles, while onshore wind plants consume nine times more minerals than gas-fired plants. With India’s domestic EV market expected to grow at ~ 49% CAGR, reaching 10 million annual sales by 2030, the demand for advanced batteries and critical minerals is set to rise significantly.
Recognising this urgency, India has taken decisive steps. The 2023 MMDR Act amendment empowered the central government to exclusively auction critical mineral concessions, and a list of 30 critical minerals was released. Auctions for critical minerals have commenced, with 24 blocks already allocated in states like Arunachal Pradesh, Odisha, and Tamil Nadu. Additionally, global partnerships have been forged to secure mineral supply chains.
In November 2024, India achieved a milestone with its first-ever e-auction of offshore mineral blocks. 13 blocks in the Arabian and Andaman Seas containing resources such as construction sand, lime mud, and polymetallic nodules and crusts, were offered. This marks a significant step toward utilising the vast offshore resources within India’s Exclusive Economic Zone (EEZ), enabled by amendments to the Offshore Areas Mineral (Development and Regulation) Act, 2002.
Maximising Value Through Strategic Policies
To fully unlock the sector’s potential, policymakers must formulate mineral policies that support growth across the entire value chain. One critical focus should be avoiding excessive taxation on minerals at the extraction stage, which could stifle downstream value creation. Instead, policies should incentivise value addition close to mineral sources, ensuring equitable distribution of mining benefits, job creation, and maximum revenue generation.
A stable and consistent regulatory environment is equally vital. Governments at both central and state levels must continue to incentivise the exploration and production of critical and strategic minerals while fostering downstream industries. Consistent policies will attract long-term investments and ensure the sector’s resilience and growth.
Charting the Path Forward
For decades, mining has been a foundational pillar of India’s industrial ecosystem. Supporting critical downstream industries like steel, aluminium, and power, it has played a key role in the country’s infrastructure and manufacturing growth. Despite its importance, the sector has historically contributed only 2.1–2.5% to GDP.
With strategic interventions, India’s mining sector can emerge as both a driver of economic growth and a cornerstone of the country’s energy transition, positioning the nation firmly on the path to becoming a Viksit Bharat.
Given the need of critical minerals for the future of India, clarity on policy and the cost impact of policy needs to be understood and appreciated better. Short-term benefits should not be at the cost of long-term development goals.
