L.V. Nagarajan, Managing Director, Hutti Gold Mines Company

Nowhere is good-enough description of this place. Its co-ordinates are 16°12' N, 76°43'E; it lies 484 kilometres North of Bangalore and some 300 km South-west of Hyderabad; and Hutti is its name, but nowhere will do just as well. The land is dry, almost denuded, rainfall, scarce, and daytime temperatures can go up to 46 degrees centigrade in the shade. No one seems to have informed Hutti that there is a telecom revolution on in the rest of the country and the phone at the one phone booth we come across isn't working; the town doesn't have a hotel; and the nearest link to civilisation is a railway station 90 kilometres away in Raichur, a couple of hours away on unpaved roads with craters that could give any decent-sized landfill a complex.

Hutti, though, isn't a town that time and the rest of India has forgotten. There's a buzz, a sense of expectancy in the air, and spring to the step of most people we meet. The increasing number of foreigners who have been seen wandering around town-no, they are not hippies on the famous Hampi trail; the ruins are a good 200 km away; these are the quiet, clean, kind who come with interpreters and question residents about local geography-has something, everything to do with the buzz. At the heart of it all is the typical Indian's love affair with a shiny yellow metal. Gold! Hutti, after all, could be the setting for India's very own Gold Rush.

Mining runs through the blood vessels of 67-year old D.V. Pichamuthu's still-sprightly frame. His father, Professor C.S. Pichamuthu was the Director of Karnataka's Department of Mines and Geology, and a recognised mining expert in his time. D.V. is past president of the Federation of Indian Mineral Industries, and a mining consultant of repute. "The noble metal is immutable by a single acid," he says, explaining mankind's fascination with gold, "but it is extremely malleable and ductile." "That and its lustrous surface explain why it has captured man's imagination from time immemorial."

While there is enough gold for everyone in Hutti, the entry of private players is not looked upon too kindly by the mine workers

India is the world's largest market for gold: it accounts for 800 tonnes of the annual global demand of 2,800 tonnes (the supply is around 2,500 tonnes). The demand-supply skew is one reason for the spiraling price of gold as shown by the worm on this page (for 10 grams), the other being the fact that the metal is seen as a safe investment in turbulent times. Indians buy 800 tonnes of gold every year, the bulk of this imported (see India's Gold Consumption). Domestic production is a meagre 3 tonnes and the sole producer is Hutti Gold Mines Company Limited. It seems an irony of sorts that India, one of the most insignificant producers of gold in the world, has the largest appetite for it. Pichamuthu doesn't attribute this to irony or a quirk of nature: he believes the blame lies squarely with the government.

Until recently, the Indian government barred private sector companies from mining; all such activity was the monopoly of the state. The Mining and Minerals Development and Regulation Act was amended in 1993 to allow for private sector participation in mining but since the jurisdiction of issuing permits lay with the states it took a decade for things to move. "All this ensured that India was the most unexplored, untapped mineral mass in the world," says Pichamuthu. "The government wouldn't explore, nor would it allow private sector companies to do so." And India's mineral wealth lay untapped.

Mineral wealth? Just why are people so convinced that India has enough of this, gold included? One reason could lie in the origin of continents. Seshapanpu Jakki, a geologist at the National Institute of Rock Mechanics in Kolar, Karnataka believes there is reason to believe that peninsular India and Western Australia (Australia produces 280 tonnes of gold a year) share a close geological relationship. The two land masses were adjacent to each other more than 200 million years ago, when both were part of super-continent Gondwanaland. "This common origin is evident in the closely comparable and richly mineralised ancient rock formations of the Western Australian Goldfields, parts of South Africa, and India's premier gold producing state Karnataka."

Once the government opened up the mining sector to private players, several companies evinced interest in the business. One, Australia India Resources Pty Ltd, an Australian company entered India through Deccan Gold Mines Ltd and even raised money through an IPO. "India is a sleeping giant," says Charles E. Devenish, Chairman, Deccan Gold Mines, with a characteristic Australian twang. "It can become a mineral superpower if it exploits its natural wealth." Devenish bullishly points to The World Gold Council's estimate that India has more than 20 million tonnes of proven, probable, and possible gold ore reserves.

With production slated to touch 3,000 kilograms this year, HGML expects to earn revenues of Rs 175 crore

Is Hutti a Klondike in the making? Not quite, laughs Pichamuthu. Individual prospectors won't exactly be rushing to the place with shovels and buckets. "That was a different era," he says. "That kind of wildcatting isn't possible today; besides it takes an investment of between Rs 10 crore and Rs 15 crore to survey a 100 square km block." Pichamuthu warns that it is possible to burn Rs 15 crore without finding a trace of gold, but admits that most global majors such as Rio Tinto, BHP Bilton and De Beers are watching mining activity in India closely.

It was the Nizam of Hyderabad, under whose suzerainty Hutti fell, who started modern mining there with the establishment of a company, Hutti Gold Mines Ltd. Post independence, Hutti went to Karnataka ; today, the state government holds a 98 per cent stake in HGML; and over the past 50 years, the mines have yielded around 55 tonnes of gold, Rs 33,000 crore at today's prices.

The Hutti-Maski pre-Cambrian greenstone belt is rich in gold deposits. However, despite a rich ore supply and a monopoly on exploration and mining, HGML was a loss-making organisation unit recently. For instance, in 2001-02, it produced 2,416 kilograms of gold, registered a turnover of Rs 115.82 crore and returned losses of Rs 6.05 crore. It does take some effort to rack up losses in a market where demand is huge, supply, limited and you are the sole producer. If HGML achieved this distinction, attribute it to its high cost of production. In 2001-02, when a gram of gold was selling at Rs 430 in the domestic market, it cost HGML Rs 459 to produce it. This wasn't about the quality of the ore-HGML's average yield is five-to-six grams per tonne of ore; in some shafts the figure touches 17 gramnmes-but plain old-fashioned inefficiency. "If modern technology is used, even mining two grams of gold per tonne of ore is viable," claims Devenish.

Over the past couple of years, however, HGML seems to have learned its lessons. Its current Managing Director, L.V. Nagarajan, a 48-year old graduate of Indian Institute of Technology, Madras (he's also a bureaucrat), rattles off a clutch of improvements: "In three years, production has doubled from 1,581 kilograms to 3,000 kilograms"; "Manpower costs have come down by 5 per cent"; "Employee expenses to produce a gram of gold have reduced from Rs 242 in 2000 to Rs 186 in 2003"; "The overall cost of production per gram is estimated at Rs 379 this year". A simple exercise in math will show that HGML is on to a good thing. The current price of gold is around Rs 640 a gram. With production slated to touch 3,000 kilograms this year, HGML will earn revenues of Rs 175 crore. Even more heartening is the company's estimates of reserves: a proven quantity of 120 tonnes and an additional 350 tonnes that needs to be mapped.

Deccan's Devenish is convinced that Hutti has gold enough. The company has spent Rs 12 crore exploring blocks in North Hutti (HGML's operations are in South) and surrounding areas. The entry of the private sector isn't looked on too kindly by the employees of HGML. "The government is bartering away India's mineral wealth," says Mohammed Ameer Ali, General Secretary, HGML Staff and Employee Union. "There is no need for any private participation here; HGML itself is competent to scout for further deposits." Ali conveniently ignores the fact that competition has spurred this competence. Still, if The World Gold Council's estimates are to be believed there's enough of the yellow metal for everyone. In a place called nowhere.