Call on iron ore canalisation after polls

Commerce ministry move draws fire from mining companies, but steel makers may favour it

Even as the mining industry and chambers of commerce have opposed the Union commerce ministry’s proposal to partially canalise iron ore exports, the move is likely to come before the Cabinet for discussion next month.

According to sources, the ministry is waiting for elections to conclude in five states, including Goa, which contributes a large chunk of India’s low-grade iron ore exports.

“The Cabinet is likely to discuss the issue of canalisation of high-grade iron ore (above 55 per cent ferrous content) before the budget session,” the sources said.

In December, the commerce ministry floated a Cabinet note favouring canalisation of high-grade ore through state-owned Minerals and Metals Trading Ltd (MMTC). It left ore below 55-Fe grade under Open General Licence, with the aim of curbing illegal mining. The move comes after the M B Shah commission of inquiry recommended a total ban on export of iron ore.

The Cabinet note says export of ore with over 55 per cent ferrous content be canalised through MMTC, which is to get one per cent of the value as commission. The ministry’s proposal has been severely criticised by various sections of the iron and steel industry. While mining companies and non-government organisations have termed the step retrograde and disastrous, steel companies have opposed only partial canalisation. “Leaving out low-grade iron ore from canalisation would give an undue advantage to miners from Goa, who mainly export low grade iron ore,” steel industry sources said.

India currently exports about 100 million tonnes of iron ore annually. Of this, Goa contributes a little over half. In 2010-11, Goa exported 54 mt, of which 40 mt were of 55 per cent Fe grade and less. “Partial canalisation is retrograde and will not curb illegal mining. In fact, it will indirectly further aggravate corruption, as there are high chances of under-invoicing and diluted declaration to avoid canalisation,” industry sources said.

The Federation of Indian Mineral Industries (Fimi), apex body of the mining industry, has strongly opposed the move. They say the time and money they’ve put into cultivating the export market would go waste. In a representation, it said, “In the international trade, even MMTC will have to sell its iron ore through other trading houses to steel mills in China, as they do in the case of Japanese steel mills. MMTC sometimes also sell to its own trading houses based in Singapore, the rationale for which is not well understood. Indian mine owners have over time developed the skill to extract the maximum price and also export through these. Recanalisation of iron ore in this manner will not give the country mileage.”

Fimi says mining companies which have cultivated the export market with a lot of expenditure of time and money should be allowed to continue directly. Only the ore mined by owners without the wherewithal and depending on local middlemen or traders should be exported through MMTC, said D V Pichamuthu, director, Fimi-South.

Vinod Nowal, director and chief executive officer of JSW Steel, said at a time when the Indian steel industry is rapidly expanding capacity, there is need to preserve ore for domestic mills and avoid export of raw material.

“In future, we may have to import steel in big quantities. Instead of canalising export of high-grade iron ore and importing finished steel products, it would be better for the country to totally stop export of ore and export finished steel products,” said Nowal, also president of the Bangalore Chamber of Industry and Commerce.

“We have long advocated a ban on export of iron ore. If the government does not want to halt it completely, they should at least include all grades of iron ore. Canalisation is the least of the evils and we urge the government to immediately open an office of MMTC in Goa to regulate the export because the government of Goa does not know how to regulate the exports of illegal ore,” said Claude Alvares, director of Goa Foundation, which has been campaigning on the issue.