Abundant resources of varieties of minerals and their mining in India have been the backbone of mineral-based industries and downstream production. Besides meeting the rising domestic demand of these commodities, the mineral sector significantly contributes to the national economy and provides direct and indirect employment to more than five crore people. The contribution of the mineral sector to India’s GDP has the potential to be increased from the current less than 2 per cent to at least 7-8 per cent.
The ambitious growth plan of India, with the vision of a $5 trillion economy, Atmanirbhar Bharat and initiatives taken for mega infrastructure projects , will need a huge commodity consumption of steel, aluminium, cement, power and other mineral products.
Respective industry sectors must plan for growth to meet the additional requirements. Hence, to meet the increasing demand of raw materials, potential mineral deposits available in the country and their mining are essential. In this context, the scope of commercial utilisation of India’s vast bauxite deposits deserves special attention for growth of the aluminium sector.
Bauxite is the ore from which aluminium is produced. Aluminium is a strategic metal for the country and is quite critical for all the key sectors that will aid in India becoming a $5 trillion economy — right from building and infrastructure to aerospace, electrical distribution and more.
Largely untapped
India is ranked fourth in the world in terms of bauxite reserves and has high quality metallurgical grade bauxite deposits with close to four billion tonne reserves. However, these abundant bauxite deposits are largely untapped, and the country is yet to leverage this natural wealth for economic growth and development. At the same time, ironically, there have been continued imports of bauxite to meet the domestic need of existing and newly established industries. The country continues to heavily import bauxite for its industrial needs causing an estimated forex loss of over $571 million in the last six years alone.
The per capita consumption of aluminium in India is quite low at about 2.5 kg, compared to the world average of about 11 kg and China’s 24 kg, while many developing countries have already reached 8 kg. Our ambitious economic growth would surely increase this to 7-8 kg in line with other developing nations. This will push domestic aluminium requirement from the present levels of 4 million tonnes to 12 million tonnes , which will require an increase in bauxite mining from current levels of 24 million tonnes to at least 72 million tonnes.
This is critically required for proposed infrastructure development, power transmission, manufacturing, transport and defence. Further, as per the Paris Convention, aluminium is a critical metal, essentially required for achieving low-carbon footprint and renewable energy generation.
Sale price
A holistic approach must be adopted for utilisation of India’s abundant bauxite resources and curbing unnecessary imports of this abundant ore. A key factor for there being no successful auction of any metallurgical grade bauxite mine since the inception of auction regime in 2015 is due to the unviable method of determination of the Average Sale Price (ASP) of metallurgical grade bauxite.
The ASP of bauxite is currently calculated from the selling price of the end-product, which is aluminium, which includes costs beyond ex-mine expenditures such as logistics, transportation, loading, unloading, rent for the stocking yard, charges for sampling and analysis, etc, resulting in a grossly inflated cost of 300-400 per cent.
This pricing abnormality has prevented participation in auctions of bauxite mines by various State governments as the current system of bauxite ASP calculation makes the production of aluminium unviable in the country. It has also resulted in new investments of over ₹50,000 crore in the aluminium sector being put on hold given its futility in the current bauxite ASP structure.
It is pertinent to note that India not only needs to pick up pace on auctioning of bauxite mines but also increase the capacity of its existing mines. Seamless increase of production from existing mining lease areas by at least 50 per cent can be an immediate win. This policy change was earlier allowed to enhance coal production in 2014 and the time is ripe for this to be implemented for other minerals, especially surface minerals like bauxite, to enhance production and rein in imports.
Jobs and revenues
The opening of a single bauxite mine has the potential to generate over 10,000 livelihood opportunities in remote regions of the country and can generate over ₹5,000 crore worth of revenue for the state. On the environment front also, surface-mining operations for bauxite are amongst the most sustainable of all metals. The mining process involves the extraction of bauxite ore from the surface and upper layer of the mine without the need to dig deep trenches.
There are enough examples in Odisha and Chhattisgarh alone where mining operations are conducted efficiently without affecting the ecosystem or the area, leading to rich economic and social dividends for all stakeholders — the state, the industry, the local communities, and the nation at large.
Despite possessing one of the world’s largest deposits, the possible key to fast-track India’s development is being ignored as bauxite mining is yet to be prioritised. The country needs to act with urgency to resolve the bauxite mining auction issues, align bauxite ASP in line with other bulk minerals to become self-reliant and save precious foreign exchange on its way to establishing India on the world map as a global aluminium hub.
The writer, a geologist, is a former Executive Director of NALCO, and ex-Advisor, Ministry of Mines