Policy Update
Gayathri Pramod
INTRODUCTION
India’s mining sector has long been a cornerstone of the nation’s economic development, supplying essential raw materials to industries such as infrastructure, energy, defense, and technology. The country has vast mineral resources, including coal, iron ore, bauxite, and critical minerals integral to industrial and technological advancements. However, the sector faced persistent challenges for many years, hindering its efficiency and sustainability. Corruption, inefficiency, environmental degradation, and complex regulatory procedures plagued the industry, limiting its potential and deterring large-scale investments. These challenges resulted in inefficient resource allocation, legal disputes, and a lack of transparency in the distribution of mining rights, which hampered the sector’s ability to contribute effectively to India’s economic growth.
A significant milestone in transforming India’s mining sector came with the announcement of the Union Budget 2025-26, which introduced several transformative measures designed to strengthen the industry’s competitiveness and sustainability. Among the key initiatives were incentives for coal gasification, the establishment of a State Mining Index to rank states based on their mining sector performance, policies for mineral recovery from mining tailings, and progressive tax structures promoting the extraction and processing of critical minerals. These measures reflect a significant shift toward a more structured and sustainable mining framework, positioning India as a competitive player in the global mineral market while ensuring that economic development aligns with environmental conservation efforts. These reforms signal a promising future for India’s mining sector, instilling optimism in the industry stakeholders and policymakers.
India’s mining industry is currently at a crucial juncture, facing significant challenges and remarkable opportunities. The global demand for critical minerals such as lithium, cobalt, nickel, and rare earth elements has surged due to their indispensable role in renewable energy technologies, electric vehicles, and advanced manufacturing. This surge in demand has created significant opportunities for countries with substantial mineral reserves, like India. However, it has also led to increased competition and supply chain vulnerabilities. Ensuring a stable and self-sufficient supply of these minerals is crucial for India’s long-term economic growth, energy security, and commitment to achieving net-zero emissions. Recognizing this urgency, the government has intensified its efforts to enhance domestic mineral exploration, refine regulatory frameworks, and encourage private sector participation to reduce import dependency.
A significant legislative advancement in this regard was the amendment to the Mines and Minerals (Development and Regulation) Act, 1957, in 2023. This amendment granted the government exclusive authority to auction critical minerals, thereby introducing a structured and transparent mechanism for resource allocation. The reform has positioned India as a proactive player in the global minerals market by addressing supply chain vulnerabilities and minimizing reliance on foreign suppliers. The strategic vision behind these policy shifts is to strengthen domestic mining capabilities while securing India’s place in the competitive landscape of critical mineral supply chains. This strategic vision instills confidence in the audience about India’s future role in the global mineral market.
HISTORY
India has historically relied on imports to meet its demand for critical minerals, making the country vulnerable to supply chain disruptions, geopolitical uncertainties, and price fluctuations. Limited domestic production of essential minerals posed strategic and economic challenges, making resource access unpredictable and costly. To address this, the government introduced reforms aimed at strengthening domestic mining, adopting advanced exploration techniques, streamlining environmental clearances, and offering financial incentives to encourage self-sufficiency in mineral production.
Regulatory Transformation in the Mining Sector
During the colonial era, mining in India was largely unregulated, with British authorities prioritizing extraction over sustainability. The absence of oversight led to unchecked depletion of mineral resources. Post-independence, recognizing the need for structured mineral management, the government enacted the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act). This legislation provided a framework for mineral prospecting, mining leases, and revenue sharing between the central and state governments.
Despite these regulations, inefficiencies persisted. By the late 20th century, issues like resource misallocation, non-transparent licensing, and frequent legal disputes hampered sectoral growth. In response, the 1990s economic liberalization encouraged private sector participation, improving efficiency and sustainability. However, the most impactful reforms came after 2014, when policies were introduced to modernize mining operations, attract investments, and curb corruption.
Key Mining Reforms: 2015, 2020, and 2021 Amendments
A major breakthrough in the mining sector came with amendments to the MMDR Act in 2015, 2020, and 2021. The 2015 amendment replaced discretionary mining lease allocations with a transparent auction-based system, eliminating corruption and inefficiencies. This reform significantly increased government revenues and improved private sector participation.
Further amendments in 2020 and 2021 introduced measures to ease business operations, enable seamless transfer of mining leases, and reduce regulatory burdens. The establishment of the National Mineral Index (NMI) ensured fair pricing in mineral auctions. Additionally, captive mines—mines restricted for a company’s own use—were permitted to sell up to 50% of their production in the open market, boosting flexibility and financial viability.
Role of Government Bodies in Mining Reforms
The Ministry of Mines and NITI Aayog played a crucial role in aligning reforms with international best practices, ensuring competitiveness in the global market. The Ministry’s Annual Report (2023-24) highlighted significant revenue growth from mining auctions, reinforcing the success of transparent mineral allocation processes. This shift attracted increased private sector investment, leading to improved resource utilization and higher productivity.
Recent Developments: Union Budget 2025-26 Initiatives
Building on these advancements, the Union Budget 2025-26 introduced new policies to enhance efficiency, sustainability, and self-reliance in critical minerals. Key initiatives include:
- Mineral recovery from mining tailings to optimize resource utilization.
- Incentives for recycling critical minerals, reducing dependency on fresh extraction.
- Establishment of a State Mining Index to improve transparency and market competitiveness.
Through these reforms, India is positioning itself as a global leader in mineral extraction, processing, and utilization, ensuring long-term economic resilience, energy security, and sustainable mining practices.
SIGNIFICANCE OF MINING
The Mining sector is crucial in India’s industrial and economic growth, serving as a foundation for various critical industries, including manufacturing, infrastructure development, and energy production. As the country transitions toward clean energy and electric mobility, the demand for essential minerals such as lithium, cobalt, nickel, and rare earth elements is expected to rise significantly. Integrating these minerals into advanced technologies—including electric vehicle batteries, solar panels, and wind turbines—is essential for India’s broader sustainability goals. Recognizing this, the government and private sector have increased investments in mining, refining, and battery manufacturing, positioning India as a key player in the global supply chain for critical minerals.
To support this transformation, the government has introduced policy initiatives like the Production Linked Incentive (PLI) scheme, which offers financial benefits to companies engaged in advanced battery manufacturing and critical mineral processing. These initiatives align with India’s “Make in India and Atma Nirbhar Bharat Programs”, which aim to boost domestic production, enhance self-sufficiency, and reduce reliance on imports. By developing a robust domestic supply chain, India can ensure the stable availability of critical minerals, reduce costs, and enhance its competitiveness in the green energy sector.
Beyond economic growth, the mining sector’s development also has significant social implications. Ensuring that mining projects generate employment, improve local infrastructure, and contribute to regional development is crucial for maintaining public support and fostering inclusive growth. The involvement of private enterprises, startups, and research institutions in mining-related innovations has further strengthened the industry’s potential. By leveraging technological advancements—such as artificial intelligence-driven mineral exploration, satellite-based surveys, and automated mining operations—India can enhance efficiency, reduce environmental impact, and improve safety standards in the sector.
The significance of the international dimension of the mining sector cannot be overlooked. As global competition for critical minerals intensifies, India’s ability to secure its mineral resources through strategic alliances and foreign investments will determine its long-term success. The country has proactively partnered with resource-rich nations such as Australia, Canada, and Argentina. Participation in multilateral frameworks like the “Minerals Security Partnership (MSP)” and the Quad Critical Minerals Initiative further strengthens India’s global mineral supply chain position. Public sector enterprises like Khanij Bidesh India Ltd. (KABIL) have also been actively working to secure overseas mineral assets, ensuring a consistent flow of raw materials to support domestic industries. These efforts collectively enhance India’s mineral security and strengthen its role in the clean energy transition.
CHALLENGES IN THE INDIAN MINING SECTOR
The mining sector in India plays a vital role in economic growth and industrial development. However, it faces multiple challenges that hinder its sustainability, efficiency, and long-term viability. These challenges range from environmental degradation to socio-economic conflicts, regulatory inefficiencies, and dependence on imported minerals. Addressing these issues requires a multi-pronged approach involving policy reforms, technological advancements, and industry-wide commitment.
Environmental Sustainability Issues
One of the most pressing challenges in India’s mining sector is ensuring environmental sustainability. Unregulated and irresponsible mining activities have led to severe ecological damage, including deforestation, soil erosion, and loss of biodiversity. Large-scale mineral extraction without proper land restoration has resulted in habitat destruction, making it difficult for ecosystems to recover. Additionally, improper waste disposal mechanisms contribute to pollution, further exacerbating the environmental crisis.
Water contamination is another major concern associated with mining activities. Toxic chemicals and heavy metals released into water bodies affect aquatic ecosystems and pose serious health risks to local communities dependent on these resources. The pollution of rivers, lakes, and groundwater due to mining operations leads to long-term damage to water quality, making it unfit for human consumption and agricultural use.
To mitigate these environmental issues, the Indian government has implemented stricter regulations and monitoring systems aimed at promoting responsible mining practices. Rehabilitation measures, such as afforestation programs and land restoration projects, are being undertaken to reverse some of the damage caused by mining activities. There is also a growing emphasis on incorporating green technologies into mineral extraction and processing. Renewable energy sources, such as solar and wind power, are being encouraged to reduce the carbon footprint of the mining industry. Additionally, efforts are being made to develop a circular economy by recycling critical minerals from electronic waste. However, achieving full environmental sustainability remains a significant challenge that requires continuous enforcement of regulations, technological innovations, and collaboration among all industry stakeholders.
Socio-Economic Challenges
Beyond environmental concerns, the mining sector in India also faces significant socio-economic challenges. Many of the country’s mineral-rich regions are inhabited by indigenous and local communities that rely on traditional land use, including agriculture and forest-based occupations. Large-scale mining operations in these areas often lead to the displacement of these communities, resulting in economic distress and social unrest. Displaced populations frequently struggle to find alternative livelihoods, as their skills and employment opportunities outside of agriculture and forestry are limited.
Another major issue is the lack of fair compensation and inadequate rehabilitation for displaced communities. Many individuals and families who lose their land to mining projects receive minimal financial compensation, which is often insufficient to support their relocation and long-term livelihood needs. In some cases, mining companies fail to fulfill their commitments to provide proper resettlement and employment opportunities, leading to heightened tensions between corporations and affected communities.
Social conflicts arising from mining activities have become a recurring challenge. Protests and resistance from indigenous communities against land acquisition and environmental degradation have led to legal disputes and, in some cases, violent confrontations. The government has attempted to address these concerns by mandating corporate social responsibility (CSR) initiatives, requiring mining companies to contribute to community development. These initiatives include infrastructure development, healthcare services, educational programs, and employment generation for displaced populations. Additionally, efforts are being made to involve local communities in decision-making processes to ensure that mining projects are carried out in a manner that benefits all stakeholders. Despite these measures, tensions between mining corporations and indigenous communities persist, highlighting the need for more effective and transparent social responsibility policies.
Infrastructure and Regulatory Bottlenecks
The Indian mining sector also faces challenges related to inadequate infrastructure and regulatory inefficiencies. Mining operations require a well-developed transportation network, efficient supply chains, and streamlined approval processes to function effectively. However, many mining regions lack proper road and rail connectivity, leading to logistical inefficiencies. The absence of well-maintained transport infrastructure results in increased costs and delays in mineral extraction and distribution.
Regulatory inefficiencies further complicate the sector’s operations. The approval process for mining projects in India is often slow and burdened by bureaucratic hurdles. Obtaining necessary permits and environmental clearances can take several years, leading to delays in project implementation. Additionally, multiple government agencies are involved in regulating the mining industry, creating overlapping jurisdictional issues and potential opportunities for corruption.
Land acquisition disputes also pose a significant barrier to mining operations. Many mining projects are delayed due to conflicts over land ownership and compensation issues. Legal disputes between private landowners, local communities, and mining companies make it difficult to acquire land for exploration and extraction. These disputes not only slow down the sector’s growth but also contribute to further social unrest.
To address these challenges, the Government has introduced reforms to streamline approval processes and improve regulatory efficiency. Digital platforms for mining permits and transparent auction systems have been implemented to reduce delays and corruption. Efforts are also being made to improve infrastructure in mining regions by investing in better roads, rail networks, and logistics facilities. However, ensuring the smooth and efficient operation of the mining sector requires continuous policy improvements and long-term investments in infrastructure development.
Dependence on Imported Critical Minerals
A major challenge for India’s mining sector is its dependence on imported critical minerals. Despite being rich in mineral resources, India still lacks the capacity to extract and refine certain essential materials, such as lithium, cobalt, and rare earth elements. These minerals are crucial for various industries, including electric vehicles, renewable energy technologies, and digital infrastructure. The rising global demand for these minerals has made supply chain security a major concern for India, as it remains heavily reliant on foreign suppliers.
The lack of advanced exploration and refining capabilities further exacerbates India’s dependency on imported minerals. Domestic mining operations for critical minerals are still underdeveloped, and the country lacks sufficient processing and refining facilities to produce high-purity minerals required for industrial use. This dependence on imports exposes India to price fluctuations, supply shortages, and geopolitical risks, making it vulnerable to disruptions in the global mineral market.
To reduce this dependency, India must strengthen its domestic exploration and refining capacities. Investment in research and development for advanced mining technologies is essential to improve extraction efficiency and processing capabilities. The government is promoting domestic mineral exploration under initiatives like “Atma Nirbhar Bharat” (Self-Reliant India) and is working towards securing strategic international partnerships for stable raw material supplies. Policy support for private sector participation and incentives for innovation in mineral processing will also be crucial in enhancing India’s self-sufficiency in critical minerals.
The challenges faced by the Indian mining sector are diverse and complex, spanning environmental, socio-economic, infrastructural, and regulatory domains. While the government has taken steps to address these issues through policy reforms and sustainability initiatives, a more holistic and long-term approach is required to ensure the sector’s stability and growth. Environmental responsibility must be prioritized through stringent regulations and sustainable mining practices. Socio-economic concerns, such as displacement and community conflicts, need to be addressed with better compensation, rehabilitation programs, and inclusive decision-making processes. Infrastructure improvements and regulatory streamlining are essential to enhancing efficiency and reducing delays in mining operations. Lastly, reducing dependence on imported critical minerals should be a key focus through investments in domestic exploration, refining technologies, and strategic partnerships.
A sustainable and well-regulated mining sector will not only contribute to India’s economic growth but also ensure that mineral resources are utilized in a way that benefits both industry stakeholders and local communities while minimizing environmental harm.
CONCLUSION
India’s mining sector is undergoing a significant transformation, driven by the increasing demand for critical minerals essential for industrial, technological, and energy advancements. While environmental sustainability, social responsibility, and regulatory challenges pose significant obstacles, the government’s proactive approach to policy reforms, investment incentives, and international collaborations is paving the way for a more resilient and self-sufficient mining industry. Strengthening domestic exploration, expanding refining capacities, and integrating sustainable mining practices will reduce import dependency and secure India’s long-term resource security.
The ongoing shift toward electric mobility and renewable energy makes the availability of critical minerals even more essential. India can achieve its vision of a sustainable and competitive mining industry by focusing on responsible mining, promoting recycling and circular economy practices, and investing in technological innovations. Public-private partnerships will facilitate knowledge transfer, attract foreign direct investment, and foster innovation in the sector. Additionally, improving infrastructure, streamlining regulatory processes, and ensuring social inclusivity will address existing challenges and enhance the sector’s overall efficiency.
As global demand for critical minerals continues to surge, India’s ability to navigate geopolitical risks, diversify its sourcing strategies, and develop a robust domestic mining ecosystem will define its success in the coming decades. The country’s commitment to environmental conservation, community welfare, and technological progress will strengthen its mining sector and contribute to its broader sustainability and net-zero goals. Through a well-rounded approach that balances economic growth, environmental protection, and social equity, India can emerge as a global leader in the critical minerals landscape while ensuring long-term prosperity for its industries and citizens.
REFERENCES
- Government of India. (1957). The Mines and Minerals (Development and Regulation) Act, 1957. Ministry of Mines, India.
ABOUT THE AUTHOR
The article is written by Ms. Gayathri Pramod Research Intern at IMPRI. She is a final year Phd student specialized in West Asia from the University of Kerala.
ACKNOWLEDGEMENT
I extend my sincere gratitude to Dr. Arjun Kumar and other faculty members. especially Aasthaba Jadeja , Aushutosh Gupta and Sayantani Ghosh for guiding me.
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
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