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| Seeking a balance in iron ore usage |
| Kunal Bose / New Delhi Jul 21, 2009, 00:15 IST |
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A debate that refuses to die away is whether irrespective of its being richly endowed with minerals, the country should persist with exports of iron ore. The subject is once again getting clouded as steel minister Virbhadra Singh is seeing merits in local steel makers’ demand that instead of exporting iron ore, India should be conserving the resource for future local use.
Singh says “If exports are to be made, it will be preferable to add value to iron ore and then sell steel products in the world market. Isn’t the US protective of its crude oil or China of its coking coal? There is a lesson for us in all this.” That the domestic steel industry has got Mr Singh’s ear is confirmed by reports that the steel ministry wants the government to reimpose 15 per cent duty on iron ore exports.
But according to R K Sharma, director general of Federation of Indian Mineral Industries, “This will be a recipe for disaster. Pressured by steel makers, the government put a duty of that order on iron ore last year which saw rapid fall in exports. The levy caused anguish among importers of iron ore of Indian origin. The duty has since been withdrawn except for a 5 per cent ad valorem export levy on lump ore.” +Sharma thinks the majority of merchant iron ore mines will collapse if the government takes “punitive steps” to scale down exports. He wonders since our steel makers without mines linkages have the comfort of abundant supply of lump ore – usage of fines is miniscule here – what could be the provocation to once again come down on mine groups.
India’s two leading steel producers SAIL and Tata Steel get all the ore from their hugely rich captive mines. There are also some other steel makers who enjoy similar advantages. At the same time, the country has about 250 independent operating mines with areas ranging from a few hectares to 250 hectares. After meeting the requirements of fines and lumps of domestic steel makers without mines linkages, these mines export their surpluses.
If any proof is needed, our 2008-09 production of ore and its domestic use will show how without exports most of the merchant mines will face inevitable closure leading to loss of thousands of jobs. The location of mines being in distant centres virtually beyond the pale of civilisation, closures will deprive indigenous people of their livelihood.
India produced 220 million tonnes (MT) of ore in 2008-09 of which about 90 MT were used locally to make 54.52 MT of crude steel. Out of the exportable surplus of 130 MT, the country sold 105 MT in the world market. The year’s surplus does not include nearly 45 MT of fines accumulated over time at mine head.
No doubt, India’s export performance would have been better had not the government unadvisedly kept the 15 per cent export duty on ore for some months last year to the annoyance of importing countries, mainly China. Can exception be taken to exports when fines constitute nearly 90 per cent of overseas Indian ore shipments? In the absence of sufficient ore sintering and pelletisation capacity here, steel makers are mainly using lumps. Mr Sharma’s logic, therefore, is fines exports should not be resisted by the local steel industry and not discouraged by the government.
On the other hand, industry officials say India has an ambitious programme to lift steel capacity from 65 MT to 124 MT by 2012 and 300 MT by 2020. The attraction of building steel capacity in India is its high quality deposits of iron ore and this should not be bartered for some immediate gains.
Apparently, this is a convincing argument. But the fact also is, the country has iron ore resources of over 25 billion tonnes. The ballpark figure is for making one tonne of steel 1.6 tonne of ore is to be processed. So why should the country be worrying about shortages occurring in the next few decades? The size of Indian deposits will automatically go up as the government is considering a proposal to lower the cut off grade of ore from 55 per cent iron content to 45 per cent.
Mr Sharma says the government instead of discouraging exports should give a push to exploration and prospecting, including reconnaissance mission to find out deposits in still virgin ore-bearing centres. Banning exports is certainly not Singh’s case. Exercising control certainly is. SAIL chairman Sushil Roongta’s prescription that a balance is to be struck between steel industry’s long-term requirements and miners’ export compulsion is worth a close look. Mining being a sensitive subject, Roongta disapproves of doing anything in haste.
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