Boom in contract mining due to talent shortage - In the news report on CNBC TV

Large projects, a significant revenue potential and almost no competition; it is an irresistible proposition for most companies. It is no wonder then construction companies are diversifying into the growing business of contract mining.

There are around 172 captive coal blocks and reserves of approximately 38 billion tonne, but no expertise to mine the coal. That is the problem various public and private sector companies are facing with the coal mines that have been allotted to them by the government.

Hyderabad's construction companies seem to have seized the opportunity. They are diversifying into contract mining. Most of them already have expertise in earth moving and they see mining as a natural progression.

“Each of these projects is 10-25 year contracts and are very large. We have sustainable business and revenue. The valuations will also be very high,” said Syam Prasad Reddy, CEO, Indu Projects.

Indu Projects has joined hands with Australian mining firms to bid for contracts. GVK and PLR Constructions are also making similar moves.

According to industry estimates, the contract mining industry is going to swell to USD 15 billion by 2015. While the rewards are quite high, the capital costs of acquiring and maintaining an appropriate mining fleet is also huge. For every million tonne per annum mined, it would take an investment of Rs 120 crore.

"The development of industry is still taking place. There are still a lot of rules and regulations that are still evolving, which contract mining and owners have to come to grip with. Also, safety regulations, environmental aspects and occupational health aspects are still evolving,” said Dipesh Dipu, Consultant, PwC.

While challenges lay ahead, it is clear Hyderabad's construction companies don't want to miss the early mover advantage and the big bucks in offing.

(You may watch the video at http://www.moneycontrol.com/india/news/business/boomcontract-mining-due-to-talent-shortage/12/41/342358)