The Net Effect of India’s Mining Ban

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It’s official: India’s economy suffered a setback of an estimated $8 billion because of the mining ban of the last 2 years, while one of its leading provinces, Goa, itself lost about US $500 million (approximately Rs 3,000 crore.)

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The Goa Government, earlier this week, released its new mining lease policy, which put a monetary figure to the losses suffered due to the halt in mining operations, something not done so far by any government authority. What’s more? Analysts are left wondering whether, if at all, old mining clients including domestic ones will return to their regular suppliers, since 24 months is a long time, and many have found new contractors in the interim.

The overall ban has been lifted in a phased manner, while the embargo in Goa came off in April after nearly 18 months. The new mining document titled, “Goa’s Grant of Mining Leases Policy, 2014,” also referred to the negative impact on other ancillary sectors because of the mining ban. Financial institutions, largely smaller banks, have been adversely affected. These were the businesses that extended loans for mining equipment, and today find themselves stranded with bad loans due to default or non-payment of loans.

Reporting on the new mining policy, The Economic Times said the stoppage of the mining operations has had a “cascading effect of a vicious nature.”

Those directly involved in mining such as truck operators, barge transporters, mining machinery owners, and small-time industries such as automobile workshops and consumer goods vendors all suffered, it said.

MetalMiner has been following the iron ore ban story quite closely. In Goa, the mining of ore was banned in September 2012 after findings of a judicial commission said the illegal mining operations over 12 years had led to massive losses to the exchequer.

Goa is among India’s topmost ore-producing states, and nearly a fourth of its total revenue comes from mining. Because of the ban, suppliers from Australia and Brazil had stepped in the space left vacant for the last 18 months to supply ore to clients.

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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