Gold Mining and Gold Production in India

Niti Aayog, the Government think-tank, has conducted an extensive study to unearth potential gold mines in a pan-India proposed programme over the next decade. The programme is looking at developing gold-bearing regions and attracting private investment into gold mining via suitable policy. The policy also aims at incentivizing small explorers to take up gold mining in India.

• India is the second biggest consumer of gold, after China, which has led to massive imports worth USD 46.16 billion during 2021-22, up by nearly 33.41% from the previous year. This has been a major factor in the widening trade deficit of the country. The trade deficit rose from USD 102.62 billion to almost double at USD 192.41 billion in 2021-22.
• Gold is placed in the 102 ‘priority items,’ as listed by the Department of Commerce. Hence, it is stated that gold imports are high and need immediate intervention for domestic production and reducing India’s foreign trade deficit.
• Currently, there is only one gold mining company in the country in Karnataka – the Hutti Gold Mine. It has produced 84 tonnes of gold since independence.

 

Pipeline ideas to improve gold production

The Government of India seeks to revamp the gold industry to improve production. Some of the steps taken in this regard are as follows:

• Significant tax cuts and benefits to attract investment.
• Lowering import duty goods & services tax (GST).
• Bringing the sector within the formal economy through changes in tax structure.
• Removing the disparity between national and international gold prices to put a check on smuggling.
• Set up a Gold Board with powers to resolve issues and act as a watchdog.
• Gold Monetization Scheme (GMS).
• The GMS intends on mobilizing idle gold lying in households, corporates, temple trusts, etc. country-wide for productive use with the motive of reducing India’s dependence on gold imports in the long run. Proposed changes to GMS suggest that banks offer services by reducing the minimum threshold of gold to be offered by customers under the GMS scheme.

Impact of gold on the economy

The gems and jewellery industry, of which gold is a part, is estimated to contribute around 7% of India’s Gross Domestic Product (GDP). Consumption and fabrication drive the metal in India. Before the pandemic, PwC estimated that gold made more than USD 30 billion contribution to the Indian economy.

Gold mining and refining can benefit India in the following ways:

• Mining can help bring infrastructural investment and create employment in states like Bihar and Rajasthan – the two primary sources of gold.
• Mining will help in supporting associated industries, as need for materials and machines to extract gold is there.
• Using our mining potential will help in reduction of current account deficit (CAD). While oil imports are primarily responsible for CAD, India’s huge gold imports are also a major factor in our CAD.
• India imports gold, but also exports gems and jewellery in large quantities. Some of the largest customers of India are US, Russia, Hong Kong, and China. Thus, the industry, including gold, plays a huge role in maintaining foreign reserves of the country.
• Gold is a crucial collateral for customers seeking loans. Pledging gold as security has been an ever-present feature of India’s market, especially during festive periods.

Problems in mining

Given the presence of gold in Indian households and its importance, the gap between the booming domestic market and untapped reserves in India offers the country great opportunities in this domain.

• Regulatory challenges, restrictive and unattractive taxation policies and poor infrastructure has led to the untapped potential of gold in India.
• Regulations are such that prospective license holders are not entitled to preferential claims even if a viable gold deposit is discovered. This discourages exploration.
• Incentives need to be raised for the sector, starting with better tax policies that can garner investment.
• High import taxes for mining equipment essentials increase capital cost and deter development.
• Approval processes for licenses are lengthy requiring multiple approvals for a single license.
• Accessibility problems to key resources such as water and electricity often stall operations. Gold mining locations are often in remote areas leading to inaccessibility due to poor rail and road links.
• Prohibitive regulation often sees mining leases and licenses handed to a select few. Most of such licenses are also taken up by land mafia groups against whom voices are not raised due to fear.
• Lack of private sector involvement is tied with a lack of incentives for private players. This hurts the industry even more as infrastructure and funds suffer.

 

Approval process for mining licenses

Minerals are categorized into two forms:

• Category 1: Minerals used for construction and other purposes, minor minerals like Road metal, Gravel, Slate, Lime concur, Mosaic chips and Limestone slabs (Colour and Black), etc.
• Category 2: Minerals useful for decorative purpose and recently converted into Minor Minerals from Major category, which are useful in industrial purposes.

Each state has its own process of granting a mining lease or license. However, following are a common set of steps that are followed in most territories across India. Please note that in some states, the application filled has to be sought from the state mining and mineral website.

• Go to the Indian Bureau of Mining website and login to proceed or create a new account.
• Select the category of applicant and then continue.
• There are 4 categories of applicants: individual, association of individuals, firm and company.
• Based on the category, appropriate screen will open and details of applicant will be displayed for filing.
• Upload the ‘Relevant Documents’ as per the selected category.
• Complete the form with the requisite data and confirm your entries.
• After confirmation, application ID and password will be communicated over the email shared within 24 hours of registration.
• The applicant may approach the concerned regional office for solution, in case of any problem.
• Application status can be tracked.

Documents required for filing for mining license:

• Copy of supporting documents of competent authority.
• Copy of Survey of India Toposheet indicating boundaries of land to be diverted.
• Scanned copy of the Geo-referenced map proposed to be mined.
• Copy justifying the location of project.
• Copy of cost-benefit analysis.
• Copy of non-encumbrance certificate for the forest land, if any.
• Copy of MoU/Agreement between company/individual/firm and issuing authority.

Visit Indian Bureau of Mining for more information at https://ibm.gov.in/
 

Conclusion

The step taken by the Government to identify potential gold mines is a positive step and must be expedited. Recession looms large on the global economy and the demand for gold will continue to grow as a secure market asset. Additionally, the Government has to ensure that tax and regulatory policies are improved to encourage gold mining and exploration. Red tape is a big deterrent and must be reduced for better exploration of the market.