India has one of the most diverse landscapes and topography, and has mineral resources in abundance. The Indian mining sector contributes about 2.5% to the nation’s GDP and creates millions of direct and indirect jobs. It is an essential sector for reducing India’s fiscal deficit, and is critical for the socio-economic growth of the country. The Indian mining industry comprises mostly small-scaled operations, with a total of 1,426 operational mines. Notably, the private sector plays a significant role in the industry, contributing 60% of the industry’s overall revenue.

Status of minerals

India has a diverse array of approximately 95 mineral deposits, and the country ranks amongst the top ten global producers of bauxite, iron ore, manganese ore, aluminium and zinc. Other than conventional minerals, India is making strides in the mining of critical and strategic minerals like lithium, cobalt and rare earth elements, which are pivotal for global energy transitions. In 2023, the Indian government announced lithium reserves of 5.9 million metric tons in Jammu and Kashmir, a component crucial to achieve net-zero goals.

Past challenges

Despite abundant resources, India has failed to scale its mining industry to its maximum potential, and still relies on imports of minerals such as manganese, copper ore and phosphorite. In 2023, India imported 90.31 metric tons of coal from Indonesia, primarily to meet the electricity demand of the country. The industry is also often criticised for its adverse environmental impact and poor safety for workers. The lack of growth in the Indian mining industry is attributable to a variety of factors, as follows.

Regulatory framework

The process for auctioning new mines and renewing existing mining leases is lengthy, due to bureaucratic inefficiencies and delays in obtaining environmental clearances, which is a pre-condition for the implementation of a mining project. Mining and ore beneficiation also requires prior approvals from the pollution control authorities of the respective states.

Entities in the mining sector are currently required to obtain multiple permits, such as licences and environmental clearances from different government bodies for each activity throughout the value chain. The government has recently made some major reforms in this aspect, the impact of which is still to be assessed. One key amendment is the removal of dual compliance of obtaining environment clearance and consent to establish, which should reduce the compliance burden on the entity undertaking mining activity.

Environmental and social concerns

The mining sector across the globe is perceived to be a major contributor to environmental degradation. In India, the social and environmental impacts of mining are often ignored as mining operations are undertaken by predominantly small-sized entities.

Critical minerals such as coal, mica and bauxite are found in traditional dwellings of tribal communities, which has resulted in the displacement of and disruption to these communities. The remoteness and inaccessibility of tribal areas poses a challenge to the enforcement of environmental laws and reduces the deterrence on mining companies for non-compliance.

In previous audits by government authorities, the pollutants emitted by most mines were found to be beyond the prescribed limits. Coal mining in the state of Jharkhand has led to deforestation, soil erosion and water pollution. Since climate mitigation measures and Sustainability Development Goals are key factors for international private and public investors, these investors tend to invest in sectors that fulfil any of the ESG criteria. The mining industry in India requires introspection to align business practices with ESG requirements.

Illegal mining

According to the Ministry of Mines, illegal mining of various major and minor minerals is carried out extensively in India due to high demand for these minerals. Illegal mining, particularly in the states of Karnataka and Goa, has depleted resources and caused revenue losses to the government. Over-extraction of resources by licensed agencies is also a key contributor to illegal mining.

To combat these issues, the government has been trying to implement novel methods, such as the deployment of satellites for surveillance. The Indian Bureau of Mines has also formulated standard operating procedures for conducting drone surveys of mines. Further measures include monthly and annual reporting requirements in relation to the production, utilisation and trade of minerals.

The government has also set up state-level task forces to monitor mining activity and conduct effective enforcement of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act). The consequences for illegal mining under the MMDR Act have also been bolstered, to reduce non-compliance. Despite these government initiatives, illegal mining continues to subsist and needs to be addressed through stricter enforcement of the regulatory framework.

Modernisation

In comparison to international standards, the technology being utilised in the Indian mining industry is dated. The government does not facilitate the necessary financial support required to modernise mining operations in India. Outdated technology also poses a threat to the health and safety of workers in this industry. In offshore mining, the government has emphasised the promotion of technology-driven solutions for deep-sea mining, with the National Institute of Ocean Technology and other global participants being encouraged to develop environmentally sustainable extraction methods.

Exploration

Prior to undertaking production activity, an exploration exercise must be undertaken, in order to assess the viability of a mineral block. However, there is a lack of interest among private participants in undertaking exploration and production, partly due to the lack of framework mandating detailed and general exploration.

Separately, in cases where exploration exercises have been undertaken, India has seen low interest in recent auctions as only a reconnaissance survey (G4) or preliminary exploration (G3) survey is undertaken in most blocks prior to auction, which does not provide details of the mineral potential of the blocks explored. To combat this issue, the government has mandated the implementation of at least a general exploration (G2) survey prior to the auctioning of the production lease of a mining block through a recent amendment.

Infrastructure

The deficiency in the infrastructure ecosystem around mining areas has also resulted in slower growth. Roads, railways and ports need to be upgraded or developed to complement the growth of the mining industry.

Government policies

The government of India has made key reforms in the regulatory landscape in this decade, realising the issues in this sector, and its untapped potential. Since 2023, the government has accelerated the process of making reformatory changes to simplify the process of the allocation of mines and to make the exploration and production of minerals financially attractive and bankable for private players.

Mines and Minerals (Development and Regulation) Act, 1957

In 2023, the MMDR Act was amended to introduce an exploration licence for deep-seated and critical minerals. The exploration licence would facilitate, encourage and incentivise private sector participation in all spheres of mineral exploration, bringing in advanced technology and expertise. The explored blocks will thereafter be auctioned for a mining lease, and the exploration agency will be entitled to a share in the premium payable by the mining lease holder.

This has been introduced with the aim of enabling an ecosystem where the exploration agencies bring expertise in data acquisition and leverage the risk-taking ability for the discovery of deposits. Similar to the practice followed in the oil and gas sector, revenue sharing between the mining lease holder and the government is undertaken if minerals are discovered, which ensures that exploration agencies as well as the government derive benefits from the exploration and mining activity.

The central government has been empowered to exclusively auction mining leases and composite leases for 24 critical minerals, as these minerals are indispensable for the growth of the economy. The auction rules have also been amended to authorise the central government to conduct auctions for the grant of mining leases or composite licences in respect of these critical and strategic minerals. These regulatory changes have led to increased participation from private players in the sector, and around 281 blocks have been successfully auctioned since 2021.

Mineral Conservation and Development (Amendment) Rules, 2024

These rules aim to implement provisions for exploration licences, to rationalise penalties for small miners with lease areas of up to 25 hectares and to relax the requirement to submit mining plans for certain categories. The rules seek to promote sustainable mining practices and enhance compliance standards within the sector.

Atomic Minerals Concession (Amendment) Rules, 2024

These rules relate to atomic minerals and focus on the procedures for granting concessions, ensuring compliance with safety standards and promoting the sustainable development of atomic mineral resources. The rules aim to streamline the concession process and enhance regulatory oversight in the extraction of atomic minerals.

There is a greater emphasis on sustainable practices, as afforestation, water conservation and land reclamation are pre-conditions for lease renewals and operations. Special incentives are introduced for the exploration and mining of critical minerals (eg, lithium and rare earths), which are vital for energy transition and the EV industry.

Offshore mining – major reforms

While the MMDR Act regulates exploration and mining activity on Indian land, the Offshore Areas Mineral (Development and Regulation) Act, 2002 (OAMDR Act) was introduced to regulate the development of mineral resources in Indian territorial waters and other maritime zones of India. India’s exclusive economic zone spans over 2 million square kilometres and is estimated to hold significant mineral reserves.

Although the OAMDR Act was introduced in 2003, nothing noteworthy took place in the offshore mining sector until 2023. Since then, the government has been proactive in streamlining the regulatory framework to, inter alia, allow private participation and extraction of minerals such as construction-grade silica sand, lime mud, precious metals and rare earth elements that lie thousands of metres below the seabed. These minerals play a crucial role in the renewable energy, EV and battery technology sectors. The OAMDR Act was amended to introduce transparent and non-discretionary auction processes for allocating operating rights in offshore areas and to enable private participation in offshore mining operations.

Existence of Mineral Resources Rules, 2024

The Ministry of Mines has recently introduced certain rules to expedite offshore mining in India. The Existence of Mineral Resources Rules lay down the procedure for identifying areas for auctions of production leases and composite leases. The process includes a survey of such areas and the preparation of a report in the prescribed form before notifying an area for auction. The rules define stages of exploration, feasibility studies, economic viability assessments and classification of mineral resources and reserves.

A minimum of general exploration (G2) is required for an area to be considered for auction for a production lease, while a reconnaissance survey (G4) is necessary for an area to be considered for auction for a composite licence. Comprehensive environment assessments have been made mandatory for all offshore mining projects.

Offshore Areas Mineral (Auction) Rules, 2024

These rules were introduced to provide the procedure for conducting competitive bidding through electronic auctions for the grant of production leases and composite licences. Auction processes are to be initiated by the administrative authority for specific mining sites or areas. The grant of any of the following operating rights in an offshore area is subject to satisfaction of the conditions contained in the Existence of Mineral Resources Rules:

• the right to conduct preliminary reconnaissance operations for minerals;
• the right to explore mineral deposits; or
• the right to extract mineral deposits for processing or dispatch.

The objective is to promote fair competition, attract private sector participation and create a level playing field for interested entities.

Offshore Areas Mineral Trust Rules, 2024

The Offshore Areas Mineral Trust has been established under these rules to regulate the management and utilisation of funds. As part of its objectives, the trust is required to utilise funds towards sustainable development of affected areas and the welfare of local communities.

The Ministry of Mines has also prepared draft Offshore Areas Mineral Conservation and Development Rules to promote sustainable mining practices. The rules set guidelines for the conservation of marine ecosystems, the rehabilitation of mined areas and the development of local communities. They require comprehensive environmental impact assessments and adherence to international best practices in order to minimise ecological disruption. Once these rules are notified, they should result in pivotal changes in the offshore mining industry and assist in achieving sustainability goals.

Reforms and the way forward

In the current era, sustainability and mining are juxtaposed, as industries strive to balance resource extraction with ecological preservation. There is also a greater emphasis on sustainability, as tailor-made policies for strategic minerals have been introduced, to align with India’s energy security and EV targets. Special incentives for the exploration and mining of critical minerals (eg, lithium and rare earths) are vital for energy transition and EV industries. The amendments require stronger environmental compliance and revenue-sharing mechanisms to ensure balanced growth with minimal ecological impact.

In January 2024, India signed an agreement with Argentina’s state-owned enterprise, Catamarca Minera y Energética Sociedad del Estado, to explore and develop five lithium blocks in Argentina. This marks India’s first overseas lithium mining project. In October 2024, India and the United States of America signed a memorandum of understanding to strengthen co-operation on critical mineral supply chains, including lithium and cobalt. These strategic partnerships aim to enhance international collaboration in securing the minerals that are essential for India’s clean energy initiatives.

In addition to reforms supporting new technology, the Indian government has also made reforms to improve the framework of minerals associated with conventional energy. A star rating policy has been issued for rating each coal mine based on socio-economic factors. The government has developed a portal where the star rating of each coal mine is published. More than 90% of mines were rated by the Ministry of Mines in 2024. The government has also developed the PARIVESH portal as a single window online portal for obtaining environmental clearances, which will reduce the bureaucratic ineffectiveness associated with the mining sector.

The central government recently issued an order directing state governments to:

• expedite mineral block auctions with transparency;
• adopt sustainable practices; and
• implement technologies like artificial intelligence for exploration and monitoring.

The order also requires the optimisation of low-grade mineral use, value addition within India and real-time monitoring to curb illegal mining. State governments are required to submit quarterly progress reports on auctions, sustainability practices and regulatory compliances. This directive aligns India’s mining sector with global environmental standards while enhancing efficiency and competitiveness in critical mineral production.

Private initiatives towards sustainability

Mining companies are also taking voluntary measures towards sustainability. In the past, Tata Steel’s iron ore mine at Noamundi installed a 3 MW solar power plant to meet its energy needs. Hindustan Zinc, the largest zinc producer in the country, launched EcoZen, Asia’s first green zinc brand to meet the growing demand for sustainable and eco-friendly materials, particularly in the automotive sector. Zinc is manufactured using renewable energy, which has 75% lower carbon footprint than the global average. Vedanta Aluminium, India’s largest producer of aluminium, announced the recycling of over 15 billion litres of water across its operations during 2024.

NDMC Limited, the largest iron ore producer in India, is running multiple schools and hospitals near its mines, across the country. Mining companies like Adani Enterprises are integrating renewable energy into operations, with over 30% of power sourced from solar and wind energy.

Conclusion

India’s mining industry is at a transformative juncture. Regulatory reforms, technological advancements, ESG integration and the commencement of offshore mining are driving the sector towards sustainable and efficient growth. By utilising its vast mineral wealth responsibly, India can secure a pivotal role in the global supply chain for critical minerals and green technologies.

As the sector evolves, collaboration between the government, private enterprises and local communities will be essential. With continued policy support and investment in innovation, India’s mining industry is ready not only to meet domestic demands but also to contribute significantly to global energy transitions and industrial development.