The term ‘resource curse' refers to countries rich in mineral wealth, yet unable to harness these to boost their own economic fortunes. Take Guinea, in West Africa, having over a quarter of the world's known bauxite reserves and a nominal per capita GDP of $420. Or Congo, home to a third of the globe's cobalt, 30 per cent of its diamonds and 70 per cent of coltan — the basic material for tantalum capacitors in mobile phones, PCs and DVD players — and with an even lower per capita GDP of $190.
Where does India fit in? A per capita GDP of nearly $1,200 and rising annually by 12-13 per cent means it is certainly not ‘cursed' in terms of growth. What about resources? With its perennial Himalayan rivers and average yearly rainfall of 1,200 mm — against China's 650 mm, France's 875 mm, Australia's 550 mm or the US' 750 mm — the country has enough water, plenty of sunshine and crop biodiversity to sustain a reasonably vibrant agriculture. Which it has, for 3,000 years or more.
But the picture is somewhat different with regard to
The situation further deteriorates as we move to energy and industrial minerals. India's crude oil and natural gas reserves of 1,200 mt and 1,450 billion cubic metres (bcm) can last for barely 30 years at existing annual output levels of 37-38 mt and 52-53 bcm, respectively. Not for nothing have crude oil and gas imports during 2010-11 topped 175 mt or the $100-billion mark.
In coal, the country's ‘proved' reserves of 110 billion tonnes, on a yearly production of 550 mt, are good enough for 200 years. However, this coal is primarily non-coking and contains 25-35 per cent ash. India, therefore, has always been an importer, especially of coking coal for steel plants.
Between 2000-01 and 2010-11, imports have risen 4.5 times to an estimated 90 mt, valued at some $10 billion. Three-fourths of it now comprises non-coking coal shipped in by power stations, making India the world's No. 3 coal producer (behind China and the US) and also its fourth largest importer (after China, Japan and South Korea).
Coming to metals, the country is relatively abundant in bauxite, with economically mineable deposits of 900 mt. Assuming an annual aluminium output of 1.5-1.6 mt and four tonnes of bauxite for every tonne of metal, these would suffice for 140-150 years. The same cannot be said for iron ore, the reserves of which are assessed at slightly above seven billion tonnes, taking care of just 30 years' annual production of 250 mt (of which 100 mt gets exported).
It is still worse in non-ferrous metals other than bauxite. The copper that is mined here meets only three per cent of the installed domestic smelting/refining capacity, forcing the likes of Hindalco and Sterlite Industries to import $4-5 billion worth of ore and concentrates every year. India also hardly mines any nickel, tin or cobalt, while its zinc and lead reserves can support current output for only 20-25 years. Mercifully, it has chromite and manganese deposits — used for stainless steel — that can probably last for 20-40 years.
In sum, the country has no in-house potash, rock phosphate or sulphur critical to its food security; little oil or quality coal for its energy security; and a precarious position in iron ore and most non-ferrous metals, barring bauxite. And we are not even discussing uranium, gold or silver! For an economy just beginning to experience high growth rates, this predicament may be termed the ‘No-Resource Curse'.
Mining beyond borders
One way to mitigate this curse is to acquire mining assets abroad, which is what many companies are doing — for instance, in coal: Adani Enteprises and Lanco Infratech in Australia, the Tatas and Reliance Power in Indonesia, JSW Energy in Botswana. The usual model here has been to take equity stakes in mines and enter into annual offtake agreements to buy, say, 10-11 mt of coal required for a 4,000-MW power plant.
Overseas deals of this kind may help secure raw material availability, though not prices. A useful contrast would be with the Oman India Fertiliser Company joint venture, where the offtake of urea at predetermined long-term prices is part of the agreement between the two governments. That negotiated price is today around $150 a tonne, against ruling world prices of $350-plus.
The investments by private Indian firms are also not comparable with those by PetroChina, Sinopec or Chinalco, which are basically extended arms (‘national champions') of the Chinese Government, often fulfilling strategic objectives beyond the commercial. To that extent, there may be not much separating an Adani and Lanco from a BHP Billiton, Rio Tinto or Vale.
In the long run, the No-Resource Curse could emerge as a major challenge to India's growth ambitions. Addressing it requires strategic vision and even a rethink of many foreign policy assumptions of the 1990s. That would mean greater engagement and investment of diplomatic resources, not just across West Asia, South Africa or Indonesia, but even Egypt, Jordan, Morocco, Tunisia, Senegal, Togo and Gabon.
For now, as always, it is the private sector that is ahead of the curve. It is time the Government, too, pitches in — may be through a rejuvenated Non-Aligned Movement with business at its core.