The Indian Mining Market: Insights into an Emerging Market for Australian METS
India has continued to develop as an exciting export destination for Australian Mining, Equipment, Technology and Services (METS) companies, with productivity lags in mining procedures creating a demand for modern technology and processes. According to Austmine’s 2015 industry survey, 20% of Australian METS companies export to India, with another 8% planning to export there in the next 1-2 years. 23% of Australian METS had operations or offices in India.
The mining industry has been a key contributor to the economic development and growth of India, providing employment to over 700,000 people annually and accounting for about 2.5% of total GDP. India is the 4th largest producer of minerals in terms of volume, largely centred around coal, iron ore, bauxite and zinc. Coal is an extremely important resource for India, accounting for 78% of electricity generation. However, despite having large reserves of coal, production has not been able to match demand (largely due to a lack of productivity), resulting in increasing imports of coal. There is both open cut and underground mines in abundance in India, with key locations in Jharkhand, Chhattisgarh, Orissa and Rajasthan.
There are currently a range of key drivers growing the mining sector. India’s annual GDP growth rate is expected to remain above 7% in the near future, despite the current stagnation of the world economy. India’s population continues to grow at around 1.2% per year and has recently climbed above 1.3 billion people. This population increase, coupled with India’s steadily climbing GDP Per Capita and literacy rates, will translate into a substantial rise in demand for power generation, infrastructure and manufactured consumer goods, all of which have primary products based in the mineral and resource sector. Not only will this enhance mining operations in India, but it will increase the volume of imports of primary and manufactured products and provoke Indian companies to expand operations overseas. Early in this process, it is crucial that Australian METS position themselves to form partnerships with growing companies.
However, finding a foothold in the Indian market does not come without significant hurdles. Whilst India has vast endowments of minerals and resources, the total value of mining output to GDP has declined from the turn of the century from 3% to 2.5%. However, there is considerable prospect for the industry to bounce back if India can provide an environment that is conducive to technological adaptation and efficient processes. This can occur through providing adequate infrastructure, reducing administration and regulatory complexities and embracing environmentally sustainable technologies.
Education and training of the labour force is a major issue if hiring domestic employees, with a high percentage of unskilled workers. There are also substantial outlays needed for capital expenditure and technological upgrades, with existing machinery and infrastructure inadequate for productive operations. These two factors have combined to stall productivity, with output per mining worker in India varying between 150 to 2,650 tonnes per annum, compared to an average of 12,000 tonnes per worker in Australia.
There is still considerable public sector dominance of the mining sector in India, reducing prospects for private companies to undertake Foreign Direct Investment (FDI) and leading to inefficient practices breeding into operations. More than 90% of coal mining is undertaken by public companies, with Coal India Limited accounting for much of this. This public sector involvement means that Australian companies must often advocate the benefits that their product can have for the Indian government. The successful negotiation of the India-Australia FTA would also be an important asset for Australian METS companies in their pursuit to engage in the Indian market.
Recent developments in public policy have been favourable to overseas companies looking to commence operations in India. FDI is beginning to be encouraged more by the government, with overseas companies now allowed to own 100% of production and processing in non-fuel and non-atomic minerals. The Indian government has also acknowledged the technological and safety limitations of current operations in the domestic market and are seeking to initiate business with overseas companies who can improve these processes.
With the Indian economy continuing to grow and develop, the resource and energy sector must keep pace by transitioning into using more efficient and sustainable practices. The current drive to improve productivity through advanced technology provides significant opportunities for Australian METS. Australian companies have the knowledge and experience required to provide technological solutions and with current regulatory changes, accessing the Indian market is a more viable prospect than ever before.
Austmine has identified particularly strong prospects for METS companies targeting Mine Developer and Operators (MDOs) and mine owners in India. Austmine have compiled a shortlist of METS operational areas where companies have significant opportunities of breaking into the Indian market, including mine planning and management (software), clean coal technology, roof support and rock stability, haulage and transport solutions, safety, mine ventilation systems, labour training and accelerating the exploration process.
Tim Martin, Australian Trade Commissioner to New Dehli, offered some insight on the opportunities developing in the Indian market, stating: "The Indian government has announced ambitious plans to more than double coal production over the next few years, from 2014-2019, with similar increases for the iron ore sector as well. Known in India as a mining superpower, Australia is well placed to assist Indian mining companies to increase not only their output, but their efficiency and safety as well. Australian METS companies are sought after by Indian mining companies, and at present there are around 40 companies active in the market."
Austmine will be conducting a Live Webinar on the 11th of May that involves a detailed discussion about the prospects in the Indian Mining Market. This will feature in-depth analysis from an expert panel of speakers and will be an important source of information for METS companies who are interested in the Indian market. For more information and to book for the webinar, please see the event page.
Sources Used in this Article:
Austmine – International Opportunities - http://www.austmine.com.au/News/articleType/ArticleView/articleId/2798/Austmine-Members-Only-International-Opportunities
Virginia Economic Development Partnership - Overview of the Mining Industry in India - http://exportvirginia.org/wp-content/uploads/2012/06/Mining-in-India-2014.pdf
Austrade live video conference – Indian Mining Sector – Opportunities and Challenges -
Austmine’s National METS Industry Survey 2015 - http://www.austmine.com.au/Industry-Insights