The mandatory-auction regime introduced eight years ago for non-coal and non-fuel minerals in India has resulted in a shift away from merchant miners to larger integrated players. This change has boosted government revenues from assorted levies. However, it has also led to potential job losses and slower employment growth in the mining sector, which traditionally had a relatively high employment elasticity.

Although the overall production of the mining sector has remained stable, exports (excluding precious stones) have declined to the lowest level in four years, standing at INR 15,424 crore in FY23. This suggests that fresh investments have not yet translated into increased on-the-ground results.

Of the 324 mining blocks auctioned in the past eight and a half years, only a few have gone to private-sector merchant miners, with the majority awarded to larger entities such as JSW Group and Vedanta. Many merchant miners have struggled to remain relevant and are now focusing on setting up end-use facilities.

While auctioning has contributed significantly to the revenues of resource-bearing states, it has also led to the transfer of funds from the merchant mining industry to larger players and the government. The revenue share percentage further increases when other statutory payments (corporate tax, GST, 2% CSR, etc.), mining costs, salaries, and other operating expenses are factored in.

This shift in the mining landscape has raised concerns about job losses and the potential long-term sustainability of the industry. While transparency has improved under the auction regime, it has created a situation where merchant miners are unable to match the premiums offered by entities with end-use facilities. Consequently, the number of reporting mines has been steadily declining, further diminishing the role of merchant miners in the sector.