india

‘Why sell ore? Sell steel’

MPs question the Centre’s decision to export raw material rather than the finished product. SHANTANU GUHA RAY reports

WHEN OFFICIALS of the Brussels-based International Iron and Steel Institute (IISI) recently visited the Indian Capital, one concern uppermost on their mind was the government’s inordinate delay in finalising the National Mineral Policy (NMP).

But a crucial point in their deliberations with various stakeholders in the sector — and also with bureaucrats of the steel ministry — was the institute’s apprehension on allocation, conditions and stipulation of iron ore blocks for captive purposes.

IISI’s tensions are understandable. Its chairman is Ku-Taek Lee, CEO of South Korean steel giant Posco, whose Rs 52,000 crore, greenfield project in Orissa’s Paradip district is stuck in a logjam. The institute’s vice-chairman is Lakshmi Mittal, CEO of ArcelorMittal, whose Rs 40,000 crore, 12 million tonne steel plant at Keonjhar — the second biggest after Posco in Orissa — faces angry protests over its proposed acquisition of approximately 3,000 acres of land.

Unlike retail, NMP has not generated a nationwide debate on its benefits and tensions but a recent note — penned by the ministry — raised interesting points on the NMP that seeks to remove bottlenecks impending investments that New Delhi expects to cross Rs 1,00,000 crore mark over the next decade. The Ministry of Mines wanted to table the NMP in the winter session of Parliament and twice placed it on the Cabinet’s agenda but failed to get a nod.

But highly placed sources claim that the NMP could be delayed because of opposition from a group of Members of Parliament (MPs) who feel the NMP needs to have substantial inputs from the state governments as well as domestic industry before being cleared by the Cabinet.

A copy of the note, sourced by TEHELKA, shows these MPs sought strict regulation of the iron ore business with permission to export only after meeting the need of domestic metal-based industries. The MPs also demanded setting up of special mining zones (SMZs) in mineral rich areas by amending the Forest Conservation Act.

The MPs claimed since India was achieving a consistent GDP growth rate of 9-10 percent for the past few years, it is imperative for steel production to increase at 11-12 percent and the mining sector to grow at 13-14 percent per annum to maintain the trend. Hence, claims the note, India must have a steel production of 110 metric tonnes (MT) by 2010 and 300 MT by 2020 and approximately 200 MT & 500 MT of iron ore respectively, to meet this production.

“But there are different perceptions about iron ore reserves in the country. The Hoda Committee says we possess 23 BT of iron ore reserves whereas the Dang Committee refuses to believe that we have more than 10 BT of recoverable iron ore reserves and also suggests that out of 10 BT, only 6-7 BT are of high and medium grades; rest being low grade ores. We have no reason to believe that the Dang Committee estimates look like the most appropriate, keeping in view that few of our large deposits are also locked up in forest and environmental hassles where mining is not possible at all or even if the mining operations has started, it has to be stopped owing to institutional/ NGO pressures,” says the note.

“Even though we are not sure of our iron ore reserves, we are continuing to export huge quantities to competing countries like China, who takes this opportunity to acquire it at lower prices, courtesy Indian exporters. We exported approximately 94 MT of iron ore in 2006-07. Though India managed to achieve the present level of 45 MT of crude steel production at the consistent growth of 6-7 percent over the past few years, we could have done a lot better had we allocated iron ore mines to major steel producers and not exported such high quantities to countries like China,” say the MPs, adding: “If the same pace continues, the entire proven reserves of high-grade iron ore would be exhausted in less than 20 years.”

THE NOTE says the current mining scenario in India was disturbing, ostensibly because top producers like ArcelorMittal and POSCO did not get clearance for captive mining despite signing MOUs. Worse, convinced of a huge demand for steel in the world in future years due to high rates of growth in India and China, these companies were setting up new steel capacities in other countries.

The MPs felt India could have earned much more foreign exchange if it had exported steel, the finished product, in the same quantity as iron ore to countries like China, Japan and Indonesia. Even the highly acclaimed Hoda Committee feels that production of each tonne of steel is 7-10 times value added product than 1.6 tonnes of iron ore, claim the MPs.

Interestingly, per capita availability of iron ore is lowest in India at 22 tonnes per person as compared to 1,417 in Ukraine and 2,000 in Australia. “The per capita consumption is going to increase in the future years and it’s important that we save our reserves to meet future demands of domestic consumption,” says the note. The ministry, as of now, has not reacted.