India’s mineral production to be hit by demonetisation

05 December 2016

The demonetisation drive may hit India’s mineral production as mine owners and contractors are deferring mining activity due to currency crunch as they need to pay daily workers in cash.

India’s overall mineral production during the first quarter of the current financial year increased 14% to 138.53 million tonne (MT) compared with 121.11 MT during the corresponding April-June period last year.

“We have received reports from various parts of the country that mining activity has been impacted as fewer labourers are available. The primary reason being contractors are not able to make daily payments to them,” a senior government official said on condition of anonymity, adding this may impact production numbers.

Another government official, who also did not want to be named, confirmed the development and said mining activity has been impacted, especially in Naxal-affected mining areas in Jharkhand, Odisha and Chhattisgarh.

India, which accounts for about 4% of the global iron ore production, has recently seen a boost with the government taking a slew of measures, including waiver of export duties and pruning of railway freight charges.

“We were expecting a phenomenal growth in mineral production this year, but the demonetisation step may impact the numbers marginally if the situation does not get normal,” said the second official quoted above.

Currently, mining contributes around 2-2.5% to India’s gross domestic product (GDP) with the government projecting a GDP growth of 7-7.75% for the current financial year. The government wants to increase the share of mining sector in the country’s GDP by one percentage point over the next three to four years.

A senior industry executive, who did not want to be named, said there is no immediate effect on the industry. However, contractors are resorting to cut in daily wage labourers for mining activity in tribal and remote areas of the country.

“If the situation persists for long, then it will even lead to loss of employment of many people,” the executive added.

Source – VC Circle