Boston, MA -- (SBWIRE) -- 07/30/2013 -- India's mining industry will continue to be characterised by regulatory and bureaucratic hurdles, while corruption will stifle growth in an already poor operating sector. Overall, we forecast the country's mining industry to reach a value of US$56.9bn by 2017, growing at an average rate of 5.0% a year.

Despite the attractive prospects presented by the underdeveloped mining sector, we believe growth in the mining industry will continue to be curtailed by the country's poor operating environment. India has a wide range of globally significant mineral resources, ranking among the world's top five countries for its core competency commodity reserves of coal and iron ore.

Iron ore reserves are estimated in the region of 23bnt (bn tonnes) and account for 6% of global reserves, while coal reserves are reported to be around 286bnt. India is the world's third-largest producer of coal, fourth-largest producer of iron ore and the fifth-largest producer of bauxite. However, only 10% of the country's landmass has been explored, due primarily to significant regulatory and bureaucratic hurdles.

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Although the 2011 Mines and Mineral Development and Regulation (MMDR) bill seeks to improve transparency and the legislative environment, in order to attract investment, but we believe the pervasiveness of corruption and regulatory and bureaucratic obstacles will continue to prevent mining companies from achieving their full production capacity. In the past mining permits/licences were issued contingent on success in the reconnaissance phase. This exposes firms to high levels of risk. However, the MMDR bill would allow the granting of non-exclusive reconnaissance licences and high-tech reconnaissance/exploration licences based on ability and intention to develop an area. Mining companies would be required to submit and display all data pertaining to the granting, extension, termination and planning of operations in the public domain.

The bill also calls for a system for bidding licences, which would greatly heighten transparency in the sector. The current system of 'first-come, first-served' in distributing natural resources for development is fraught with potential conflicts of interest and can be easily abused by officials. As of April 2012 the government decided still to distribute natural resource assets in this manner, despite a Supreme Court ruling stating that all national resources must be distributed only through auction.

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