Cap ore exports: Steel firms for capping ore exports

Miners making money at the cost of the nation, alleges ISA.

Making a case for capping iron ore exports, steel-makers said export volumes of the mineral had been swelling and its prices increasing globally, threatening expansion plans of the domestic industry.

"Iron ore is a non-replenishing commodity. What do we do if it gets exhausted? All our expansion plans will put on hold if the country is forced to become the net importer of ore. We need to analyse what economic sense it makes for the nation to allow exporting of the mineral," a source in the Indian Steel Alliance (ISA) said.

"Iron ore exporters had already increased the prices by $21 a tonne between January and May, which is an increase of 36.20 per cent. Last month, ore exports from ports were 8.01 mt against 7.37 mt in May 2006, amounting to a growth of 8.7 per cent. This gives them a substantial growth in their top line despite the appreciation of the rupee," the source said.

Citing the Indian Ports Association (IPA) data, sources pointed out that total exports from ports were 7.37 mt in April against 7.02 mt in April 2006, leading to a growth of 4.8 per cent. Miners, however, claim that exports have dipped by 10 per cent due to rupee appreciation, imposition of export duty and recent increase in freight charges.

"According to the data provided by the Indian Ports Association, iron ore exports have increased and will continue to increase," the ISA sources countered.

Sources said iron ore spot prices in January were $58 and this month the prices have already touched $79.

Pointing out that no other industry in the country generated profits like the iron ore sector, the ISA sources said, "A classic example is the fourth quarter profit of NMDC. Being a PSU, if NMDC can yield an operating profit of over 90 per cent and net profit of around 57 per cent, one can easily guess the profitability of standalone unlisted private miners."

Demanding a cap on iron ore exports, they said it had been witnessed that standalone iron ore mining did not require any substantial capital investment as in the case of steel plants. Moreover, the state and the central government exchequers do not get the revenue realised from the steel sector.

"One tonne of iron ore export gives the government Rs 17, whereas one tonne of steel produced gives Rs 4,300 as revenue, which includes VAT, excise and the royalty.

Employment-multiplier ratio between standalone mining vis-a-vis steel-making is 1:20. This is the reason that you do not see any listed companies under the mining sector except companies such as NMDC and Sesa Goa," they pointed out.

Standalone mining not only leads to safety hazards, but also paved way for poverty, child labour, Naxal activities and other anti-social elements, besides enabling a few private mine owners to accumulate personal wealth at the cost of economic growth and national interest, they contended.