MINING MARKET IN INDIA.

The mining industry contributes to 2.2% to 2.5% of GDP, but going by the GDP of the total industrial sector it contributes around 10% to 11%.

Mining is one of the core sectors of Indian economy. India has a vast mineral potential with mining lease granted for longer durations of 20 to 30 years. India produces 95 minerals - 4 fuel-related minerals, 10 metallic minerals, 23 non-metallic minerals, 3 atomic minerals and 55 minor minerals (including building and other minerals). India has chosen to use coal mining and power generation to revive Indian economy post Covid. India is the only country which is going to almost double coal production in next 3-4 years.

Market Situation

India is the third largest producer of coal. Coal production in the country stood at 729.10 million tonnes (MT) in Financial year 2019-2020 and reached 145.9 MT from April to June 2020. India ranks fourth in terms of iron ore production globally. Production of iron ore in FY20 stood at 205.70 MT. India has around 8 % of the world's iron ore deposits.

The index of mineral production was 132.7 in March 2020. Mining group under Index of Industrial Production (IIP) stood at 109.7 for FY20, witnessing a growth of 1.7 % y-o-y. Mineral production in India reached Rs 68,577.09 crore (US$ 9.73 billion) in FY20E (till February 2020).

Government Initiatives

Government of India has allowed 100 % Foreign Direct Investment (FDI) in the mining sector and exploration of metal and non-metal ores under the automatic route, which will propel growth in the sector.

Government introduced Mineral Laws (Amendment) Bill, 2020, to open a new era in Indian coal and mining sector, especially to promote 'ease of doing business'. The Ministry of Steel aims to increase the steel production capacity to 300 million tonnes by 2030-31 from 134.6 million tonnes in 2017-2018, indicating new opportunities in the sector.

Under the Mines and Minerals (Development and Regulation) Act of 1957, FDI up to 100% under the automatic route is allowed for mining and exploration of metal and non-metal ores including diamond, gold, silver and precious ores, while FDI up to 100% under the Government route is allowed in mining and mineral separation of titanium bearing minerals and their ores.

The government is keen to step up India's coal production. Despite having the world's fourth largest coal reserves, India's import is around 235 MT of coal every year. The government estimates that of this, at least 135 MT can be substituted by mining more locally. The Centre had set a mining target of 1.5 billion tonnes of coal by 2020, which was missed.

One of the most vital pillars India's Aatmanirbhar Bharat strategies is the opening up of commercial coal mining.  The move should boost production and mining efficiency. It is expected that the substitution of imported non-coking coal with domestic production could save roughly ₹30,000 crore (€ 3529.41 million) of coal imports. It expects the participation of private miners to increase competition, and enhance productivity by facilitating the use of latest equipment, technology and services through higher investments.

In May, along with opening up commercial coal mining, promoting coal gasification and auctioning 50 new coal and 500 mineral blocks as part of the Covid-19 reforms package, the government also promised an investment of € 5882.35 million (Rs. 50,000 crore) to create transportation infrastructure for evacuating 1 billion tonnes of coal from Coal India's mines.

Coal India Stepping Up

The Kolkata-headquartered mining major has set a production target of 650-660 MT in the 2020-21 fiscal as against 602 MT a year ago. With an aim to achieve one billion tonne coal production by the year 2023-24 and make the nation Atmanirbhar in coal, Coal India (CIL) will make investments over € 14.3 billion (Rs 1.22 lakh crore) on about 500 projects related to coal evacuation, infrastructure, project development, exploration and clean coal technologies.

Of the proposed investment of over € 14.3 billion (Rs 1.22 lakh crore), the company has planned to invest € 3846.59 million (Rs 32,696 crore) on coal evacuation, € 2954.94 million (Rs 25,117 crore) on mine infrastructure, € 3466 million (Rs 29,461 crore) on project development, € 3788.12 million (Rs 32,199 crore) on diversification and clean coal technologies, € 175.89 million (Rs 1,495 crore) on social infrastructure and € 222.71 million (Rs 1,893 crore) on exploration works.

Further, in a transformative plan to increase coal output and reduce import dependency of coal in ensuing years, the company has identified a total of 15 green field projects to operate through Mine Developer and Operator (MDO) model that will entail a total investment plan of approximately € 4070.59 million (Rs 34,600 crore) of which likely investment by FY24 is about € 2000 million (Rs 17,000 crore).

Apart from this, evacuation infrastructure is another major area where Coal India will invest large sums of money. The investments will be made in rail logistics like developing major railways about € 4070.59 million (Rs 13,000 crore); railway sidings about € 364.7 million (Rs 3,100 crore) and procurement of own wagons € 79.41 million (Rs 675 crore) will total up to likely investment of over € 1941.18 million (Rs 16,500 crore) by FY23-24.

The company has finalized contracts for heavy earth moving equipment worth over € 694.12 million (Rs 5,900 crore) to ramp up production. The miner is also planning a capex of € 1176.47 million (Rs 10,000 crore) during the current fiscal.

Early this year, the company had said it was looking at spending around € 823.53 million (Rs 7,000 crore) on heavy equipment to bolster production. Heavy earth moving machinery worth over € 694.12 million (Rs 5,900 crore) has been finalized for augmentation of coal production and improving age profile of equipment.

Covid Impact

Mining is a fairly labour intensive activity in India. Substantial number of labourers is involved in loading and transportation of ores. With mine operations being scaled back, many such migrant workforce had gone back to their native places. Hence, in order to scale back the operations to normalcy, as we see surge in demand again, the availability of adequate number of qualified workers will remain a key constraint for miners.

The Covid-19 outbreak and the ensuing lockdown lead to high inventory holding for the machinery manufacturers. The rate of awards is far slower than the execution, leading to a moderation in the pipeline of orders. Tough financing environment and liquidity strain in the market made it difficult for majority of the dealers to secure funding, thereby impacting sales to some extent during FY2020.

Mining Equipment

We estimate the Indian-German business with mining equipment as eternal up and down, finally despite Corona again a small up. From January to May 2020 exports of mining equipment raised by 10 percent to 11,5 million Euro. The machines most in demand were crushing and grinding machines (40%), coal and rock cutters or tunneling machines (21%), boring and sinking machinery (13%) and sorting, screening, separating or washing machines (9%).

Outlook for 2021

The mining sector has been so far the forerunner of the off-highway market during the Covid period, since the government has asked the mining PSUs to invest on capex to instigate demand in the sector. Coal India, therefore, has come out a lot of orders for procurement of mining machineries. Moreover, the opening up the mining sector for the private players is also expected to create further demand in the sector.

The demand is expected to revive during Q3 FY2021, after Q2 FY2021, which is typically a lean period for the industry on account of monsoons.  However, with the easing of norms, and the efforts of the government, mining equipment makers see some revival in demand. It expects the recovery to be gradual amid easing of lockdown and opening up of the economy in many parts of the country.

German Pavilion at IMME 2020 (Virtual)

CII organizes India's largest and focused Mining exhibition for the last 36 years in Kolkata, India. The 14th edition of IMME was held in 2018 at Kolkata and the event attracted 232 companies from India and Abroad. The Government of Jharkhand was the Partner State and the event was supported by the Ministry of Mines and Coal India. Germany was the Partner Country and Australia was the Focus country. There were 10 country pavilions viz Australia, Canada, Czech Republic, China, Germany, Russia, Turkey, UK and USA.

While IMME 2020 was scheduled to be held from 12 - 15 December 2020 at Ecopark, there are issues in organizing a physical exhibition in 2020 due to Covid-19 disruptions. Hence CII will be organizing a Virtual Exhibition on Mining - IMME 2020 which will be live from December 2, 2020.

BOX

The German Engineering Federation (VDMA) is organizing a Virtual German Pavilion in the 15th International Mining & Machinery Exhibition (IMME 2020). Please do visit us at the virtual show! Details are given below:

Dates: 2nd December 2020 to 1st February 2021

Timing: Open 24 hours all 60 days

Place: Virtual presence in CII Hive

Focus: Mining Equipment Manufacturers, Components, MOD's and Aggregates.

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