Assocham against relaxing iron ore export restrictions

Associated Chamber of Commerce and Industry of India (Assocham), an apex body of industry representatives, has urged the Union finance minister not to relax the restrictions on exports of iron ore in a bid to control the widening current account deficit (CAD).

"Any relaxation in export restrictions on iron ore will adversely impact the prospects of India's steel industry which is reeling under severe crisis due to non-availability of iron ore for last couple of years owing to suspension of mining in Karnataka and Goa by the Supreme Court and restrictions on mining activities in Odisha by the state government," Assocham wrote to Union finance minister, P Chidambaram.

It stated that strict enforcement of environment and forest laws along with other regulatory compliances have affected iron ore production in India, as a result of which steel industry is facing acute shortage of raw material.

The total iron ore production in India has come down to 140 million tonne per annum in 2012-13 compared to 201 million tonnes in 2009-10.

Assocham said, the capacity utilization of Indian steel industry has touched all time low of 82 per cent, as against 88 per cent recorded between 2003-04 and 2010-11, due to severe shortage of iron ore and cheap imports of steel from Japan and Korea under free trade agreement (FTA).

The production of finished steel in the country has seen a growth of meagre 2.5 per cent in 2012-13 while the consumption is up by 3.25 per cent. Most of the demands are met by import which has registered a growth of 15 per cent in 2012-13.

The chamber said, the CAD can be controlled by reducing the imports of the finished steel and coking coal.

India imported 7.8 million tonne of finish steel and 35 milliion tonnes of coking coal worth USD 4.6 billion and USD 7 billion respectively, mainly from Japan and Korean companies.

"The Jharia Coal Field in Jharkhand's Dhanbad district with coking coal reserves to the tune of about 19 billion tonnes must also be developed further to reduce coking coal imports", said DS Rawat, national secretary general , Assocham.

Citing Supreme Court's ruling on mining operation in Karantaka, the industry body said, imports of steel can be reduced by making iron ore available to the Indian steel producers in place of exporting the mineral.

While partially lifting mining restrictions in Karnataka, the apex court had pointed out that the iron ore should be used for meeting the raw material requirement of steel plants and associated industries located in Karnataka and adjoining states and exports should be permissible only in respect of material which the end-use industries are not willing to purchase at or above the average price fixed by the monitoring committee.

Stating that the domestic steel industry are now capable to utilize all type and grades of iron ores produced in the country, Rawat said, "With the projected growth in steel production, the domestic steel industry will consume almost all the iron ore fines, lumps and sub grade material available in the country. They may even need to import ore to meet the demand."

In such a situation if export restrictions are relaxed, it will adversely impact the prospects of the already struggling Indian steel industry, he argued.