It is indeed ironic that two of the things that Indians love to spend on — gold and fuel — are produced in such miniscule quantities in the country.

Many experts feel the import of gold in such large quantities is the main culprit behind our burgeoning current account deficit. They have offered many solutions, such as increasing the duty on gold imports.

But the penchant for the yellow metal is such it would only lead to citizens smuggling gold through their shoes.

Unsurprisingly, no one has spoken about increasing gold production in the country as we anyhow produce so less of it — India produces around 2.8 tonnes of gold compared with China that produces around 370 tonnes.

production ISSUES

Currently, India has only three producing gold mines — Hutti, Uti and Hirabuddini — and domestic production has almost stagnated at about 2.8 tonnes annually for quite some time. However, at one time, gold mining in India was synonymous with the Kolar Gold Fields — whose history of gold mining can be traced to the Indus Valley Civilisation. The Guptas, the Cholas, the Vijayanagar Empire and Tipu Sultan all laid their hands on the golden land during their rule.

Large-scale mining happened only in the 1850s under the British firm John Taylor & Company, that did much of the prospecting and mining with skilled manpower and sophisticated machinery.

The mines were taken over by the Government of Mysore in 1956 and by the Ministry of Finance, Government of India, in 1962.

Then, they were handed over to Bharat Gold Mines Ltd, under the Ministry of Mines, in 1972.

Though BGML was into the business of gold mining and production, it could not attain any of the ‘rathna’ status provided to public sector units; the deeper and wider they mined, the lesser the reserves they found. During this period, BGML had assembled a workforce of around 3,000 and had also accrued a huge infrastructure cost.

The gold mines of KGF were closed down in 2001 due to reducing deposits and increasing costs.

Since then, most of the action has been taking place in the courts of law — a legal struggle is being waged by the ex-employees of BGML with the Ministry of Mines.

In September 2003, the Karnataka High Court directed the Government to hand over the mines to the employees and, in December 2006, the Ministry undertook in court to do so at a market-determined price.

In July 2010, after protracted litigation, the Karnataka High Court finalised the terms and procedure of transfer, which again went into limbo.

In July 2013, the Supreme Court approved the Centre’s plan to float global tenders to revive the gold mines a full 12 years after they were closed down.

Bright Prospects

Vedanta Resources is now eyeing expansion into gold mining and looking at bidding for the assets of BGML. Just like the metal, gold mining is a costly proposition.

It appears almost certain that the Kolar Gold Fields will not be able to attain the Numero Uno position in gold production, but it would certainly be good to know the inventory of gold reserves there.

Apart from KGF, there are about 40 mines where prospecting has been done.

The Government should ensure that entities like Vedanta are encouraged to search for gold. However, this would also need to be controlled and regulated, going by the iron ore mining experience in Karnataka.

As in the Olympics gold medal tally, India may not be able to better China in production, but it could at least reduce the gap.

(The author is Director, Finance, Ellucian.)

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