The Hindu Business Line : Steely intentions

This article is triggered by a comment made at a recent public lecture by a doyen of the steel industry, who was responsible for reducing the workforce of a major steel company by about half. His point is simply that anyone can enter into an MoU with the authorities concerned to set up a steel plant, get a mining concession and export iron ore and make tonnes of money instead of tonnes of steel. He categorically declared that we must keep our best ore. I would add that w e must graduate to become a major steel exporter instead of a minor iron ore exporter. In 2004, of the total world import of 684 million tonnes (MMT) of iron ore, the percentage shares of China, the EU and Japan were 30, 22 and 20 respectively. The major exporters are Central and South America, Africa, India and Australia with percentage shares of 40, 5, 9 and 31 respectively. India exported 63 million tonnes.

The three major net steel exporters — Japan, Ukraine and Russia — have about 20 per cent share each. . India’s net export was less than 2 per cent of the global net export.

The National Steel Policy 2005 envisages indigenous production of 110 million tonnes per annum by 2019-20, close to three times the 2004-05 level of 38 million tonnes. The Policy expects a net export of 20 million tonnes and domestic consumption of 90 million tonnes by 2019-20. The requirement of iron ore will be 190 million tonnes for the envisaged level of steel production. The level is almost four times the 54 million tonnes used in 2004-05. Why worry about stopping export when we have 11.43 billion tonnes of haematite, which is relatively rich in iron content and a further 10.68 billion tonnes of magnetite ores, not so rich in iron.

Policy and Strategy

The one major policy issue is whether so many private parties are needed for iron ore mining. There were some 600 mining leases, of which only 246 were operated in 2003-04. As regards strategy, why should we be exporting at all.

According to the policy document: “The current policy of captive mining leases for the private sector would continue, but it is necessary that investment plans be put in place for idle mining leases. State governments would recommend renewal of existing leases only against credible mining investment plans in a specified period.” It could well be considered perverse national interest and unethical economic rationality if private parties are permitted to export iron ore, without substantial value-addition. Private sector participation is welcome, not in raw mining but at high-end production. Mining leases must be either for strategic counter-trade or for significant value-addition.

(The author, a visiting faculty at Sri Sathya Sai University, Prashanti Nilayam, can be reached at bhanoji@gmail.com)

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