HEAVY BURDEN OF RICHES
The natural resources sector in India is going through a challenging phase. Blanket bans and delays in clearances have left it in an unsustainable position and we are unable to capitalise our abundant reserves of minerals and hydrocarbons for economic growth.
Not so very long ago, Australia, Brazil and other countries in Latin America were on a par with India in the utilisation of natural resources. But we stagnated and they marched far ahead; through sustainable exploration they have increased their reserves over three times. This has cost India dear in terms of GDP growth.
Instead of extracting and utilising our natural resources, we spend billions of dollars to import them. This makes no sense. India has the world’s fourth largest reserves of bauxite, a much sought-after raw material for making aluminium, but they remain unexplored. Indeed, India has not opened a large bauxite mine in more than 35 years.
Gold and copper sectors are also frozen despite the Supreme Court opening them up for investment. Same is the case with iron ore. India’s iron ore reserves are comparable to those of Australia and Brazil, yet the difference in production and outlook is immeasurable. Australia’s production has doubled to 600 million tonne a year as has Brazil’s to 400 million tonne, but India is struggling to maintain its production of around 100 million tonne. Oil and gas sector is no better. The importance of energy security can’t be stressed enough, yet India continues to import most of its oil requirement. That too at $100 a barrel even though we can produce it for $4 a barrel if we tap the large pool of oil and gas we are sitting on. To explore the treasure will take at least 20 companies. So we must encourage Indian entrepreneurs to take up this challenge.
The import bill for petroleum products now stands at $150 billion. And not just oil and gas, the country is also buying large quantities of gold, silver, coal and fertilisers from abroad. The growing import bill—the total now comes to $485 billion, or close to 10 per cent of the national Gross Domestic Product— is eroding national income, stunting economic growth and increasing unemployment and poverty.
I believe India has the potential to produce $400-$500 billion worth of natural resources, including oil and gas, gold, silver, aluminium, copper, iron ore, coal, calcium, rock phosphate. And more than half the revenue generated from these resources will go to the government, which it can use to develop infrastructure and support social welfare and development programmes. Mining and exploration of these resources and their optimal utilisation will also create employment opportunities for 10-15 crore people by enabling setting up of thousands of large, medium and small scale industries to process them in a sustainable manner. As a result, GDP growth will rise and current account deficit will come down.
We can leave the reserves in the ground for another 100 years but eventually, we must tap them for the good of the country, and the mankind. The sensible thing to do is to auction natural resources in a transparent manner—the model can be revenue sharing or whoever pays higher royalty— under simple policies so that they can be used to strengthen and rejuvenate the economy. To encourage investment in the exploration of natural resources, India needs a liberal economy where the government and the industry are on the same side. It does the nation little good to discriminate between public and private sectors. Quite the opposite. It hurts business sentiment when ONGC is allowed to explore shale gas while the private sector is awaiting approvals; when despite the ban in Goa and Karnataka—the latter has opened up partially now— NMDC is finding it easier to mine iron ore; when Power Grid Corporation of India is reaping the benefit of being a public sector firm in the transmission business while private players are struggling. Or when Nalco, rather peculiarly, is exporting alumina at a much lower rate than is being offered by domestic companies, which are struggling for want of this raw material.
Both public and private sector are involved in building national projects, then why this discrimination? Isn’t the country more important? Most companies redeploy their profits if incentivised, as has happened in China and the America. In fact, it’s this simple policy of allowing people to make reasonable money that has made America self-sufficient.
Industrialisation is here to stay. Industries contribute greatly to the economy and play a fundamental role in building a progressive nation. Besides, their increased focus on development is helping the government achieve its social agenda. Together, the industry and the government can make a difference and build a nation. India is blessed with a vibrant democracy, a vigilant media and an excellent legal framework. All it needs is one strong decision to become the planet’s third largest economy; a decision to frame policies and commitments that inspire global confidence. The world is watching.
Instead of extracting and utilising our natural resources, we spend billions of dollars to import them.
This makes no sense.