Mining in India’s Northeast – Challenges and Opportunities in the State of Meghalaya
By: Dezan Shira & Associates
Editor: Kimberly Momin
India benefits from a rich repository of mineral resources that constitute the fundamental raw materials for the mining industry. Presently, there are about 3700 active major mines in the country, which have generated employment for over 500,000 people. In 2012-2013, the value of mineral production in India reached approximately US $44.65 billion – 2.4 percent of GDP.
Most of the accounted mining industries in the northeastern region are located in the states of Assam and Meghalaya. Assam is known for its petroleum and natural gas reserves, coal, limestone and minor minerals; Meghalaya has established coal and limestone mining industries.
Despite their economic importance, the mining industry in the northeast has been systemically plagued by a multitude of challenges.
These challenges primarily stem from ambiguous policies and regulatory hurdles that have led to unchecked corruption and environmental degradation. In Meghalaya, this has additionally resulted in the displacement of the indigenous people of the state, culminating in a ban on coal mining by the National Green Tribunal. Considering that coal mining provides seven to eight percent of the state’s GDP, the ban has adversely impacted Meghalaya’s finances.
Mining Profile of Meghalaya
Meghalaya is a small hill state in northeast India and shares an international border with Bangladesh in the south. Its capital is Shillong, once called the “Scotland of the East” by European settlers. Meghalaya has 11 districts and three main tribes – Garo, Khasi and Jaintia. The entire state is under the Sixth Schedule of the Constitution of India, which contains provisions for the administration of tribal areas in the states of Assam, Meghalaya, Tripura and Mizoram. Under the Sixth Schedule, only the District Autonomous Councils in these states have the power to legislate to protect tribal customary laws, identity and culture.
Meghalaya is largely an agricultural state, but has sizeable deposits of minerals like coal, limestone, uranium, granite, kaolin, clay, glass sand, silimanite, and small quantities of feldspar and iron ore, quartz, bauxite, and rock phosphate. Though the hugely lucrative coal mining industry has been banned since April 2014, the Government of Meghalaya has given 16 leases to mine limestone reserves in the state. 68 percent of the limestone mined is used by cement industries and the remaining 32 percent by lime manufacturers.
Apart from coal and limestone, the state has the third richest reserves of uranium after Jharkhand and Andhra Pradesh. A significant amount of it has been discovered in Domiasiat and Porkut-Nongjri in the Wahkynshi area of the west Khasi Hills. The Uranium Corporation of India Limited (UCIL) proposes to mine the mineral in the state, but operations have been stalled in the exploration phase due to local opposition.
As of now, Meghalaya has no proper regulatory regime for mining, and mines and minerals are subject to a cluster of central laws, namely The Mines Act, 1952, The Mines and Minerals (Development & Regulation) Act, 1957, and The Coal Mines (Nationalization) Act, 1973. A new mining policy, proposed by the state government – The Meghalaya Mines and Minerals Policy, 2012 – is yet to be implemented.
Paragraph nine of the Sixth Schedule of the Indian Constitution gives District Autonomous Councils the final authority to provide licenses and leases for prospecting and extracting minerals.
Major Mineral Deposits in Meghalaya
Despite the challenges in some mining sectors, the state government of Meghalaya still has vested interests in the mining industry, as it contributes significantly to the state’s revenue. In addition, industrial potential in the state is strong based on the indigenous spread and availability of minerals. Cement and lime industries have already set their bases in the state. Other potential mineral and related industries that can be set up include precipitated and activated calcium carbonate, calcium carbide, bleaching powder, acetylene black, thermal power, low-temperature carbonization plant, fire bricks, stone wares, wall/floor tiles, low ash coke, and generation of producer gas – to name a few.
The proposed Meghalaya Mines and Minerals Policy mentions the participation of private sectors and joint ventures to take part in mining related activities. If this policy is implemented, it could mean a huge investment opportunity for private and foreign players. Under the Make in India Initiative, foreign direct investment (FDI) has been allowed up to 100 percent in exploration, mining, minerals processing and metallurgy. In India, mining leases are usually given for 50 years.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.
Managing Your Accounting and Bookkeeping in India
In this issue of India Briefing Magazine, we spotlight three issues that financial management teams for India should monitor. Firstly, we examine the new Indian Accounting Standards (Ind-AS) system, which is expected to be a boon for foreign companies in India. We then highlight common filing dates for most companies with operations in India, and lastly examine procedures and regulations for remitting profits from India
Using India’s Free Trade & Double Tax Agreements
In this issue of India Briefing magazine, we take a look at the bilateral and multilateral trade agreements that India currently has in place and highlight the deals that are still in negotiation. We analyze the country’s double tax agreements, and conclude by discussing how foreign businesses can establish a presence in Singapore to access both the Indian and ASEAN markets.
Passage to India: Selling to India’s Consumer Market In this issue of India Briefing magazine, we outline the fundamentals of India’s import policies and procedures, as well as provide an introduction to engaging in direct and indirect export, acquiring an Indian company, selling to the government and establishing a local presence in the form of a liaison office, branch office, or wholly owned subsidiary. We conclude by taking a closer look at the strategic potential of joint ventures and the advantages they can provide companies at all stages of market entry and expansion.