Iron ore exports may be canalised, not banned

To monitor iron ore exports, a cause of illegal mining, the government plans to canalise exports of the mineral. Notably, the Centre-appointed MB Shah Commission has, in its interim report, pitched for a pan-India blanket ban on exports as a measure to curb illegal mining.

The proposal will be sent to the Union Cabinet once inter-ministerial discussions are completed. “The ministry of mines is in discussion with the ministry of commerce and industry,” according to a senior official. “The basic idea is to have a single agency accountable for the illegalities that arise in the iron ore trade,” he told Business Standard. The government is considering the recommendation on a ban on exports in the context of the export-import policy.

Currently, iron ore exporting companies enter independent bilateral deals with foreign entities. If the canalising proposal comes through, big exporters such as Sesa Goa, Fomento Resources, MSPL Ltd and VM Salgaokar & Bro would be forced to execute these contracts through a government-owned company such as MMTC, NMDC or State Trading Corporation.

SHAH COMMISSION’S RECOMMENDATIONS

* Ban export of iron ore and manganese ore

* Amend Section 24 of MMDR Act, 1957 (deals with govt’s power of entry and inspection of a mine)  

* Amend Rule 26 & 27 of MCR 1960 restricting persons convicted for illegal mining from lease renewals and cancellation of lease  

* Amend Rule 24 A of MCR pertaining to deemed extension of leases 

* Amend field circulars issued by IBM for regulation of boundary pillars of leases  

* State governments should improve regulation

The government suspects the huge spurt in global iron ore prices in the past three-four years, primarily driven by China’s exponentially rising demand for low-grade ore, has led to unchecked and unaccounted exports. The proposal to canalise, if ratified, would mean all exports must be routed through a government-nominated agency.

The larger picture, though, bears one main concern. “There is a demand-related push for illegal mining. That is creating unregulated supplies,” the official says. “The setting up of a canalising agency would act as a short-term solution until we put in place mechanisms to improve poor last-mile governance in mineral-rich states, the basic reason for illegal mining.”

The mining sector, with its dismal performance of late, as indicated by the latest IIP numbers, has already emerged as a drag on the country’s economic growth. The Shah commission’s recommendation of banning exports, if implemented, could further beat down output, thereby compounding the sector’s woes. The canalising proposal is not part of the commission’s recommendations.

Iron ore is a major mineral that acts as a critical input in key infrastructure industries. India, the world’s fourth largest producer of the metal, mines 220 million tonnes of the ore annually. Around 120 mt of this is consumed domestically to fire the nation’s 65 mt steel-making capacity, 32-mt sponge iron capacity and 20 mt pellet-making capacity.