The Hindu Business Line : Getting metal contours right

The positive correlation between economic growth and metals consumption is too well known for repetition. The growth trajectory of the last four years and GDP growth projections for the Eleventh Plan (2007-2012) leave little doubt that the country’s metals consumption — both base and industrial metals — is set to expand steadily in the coming years. The burgeoning housing and construction sector as also (envisaged) investments of nearly $250 billion on in frastructure (airports, seaports, roads, power generation) are set to kick off a major demand/consumption-led boom in the metals sector. It is therefore critical that exhaustible or non-renewable natural resources (raw material for metals manufacture) are not only exploited optimally, but also utilised rationally so that our self-reliance is not compromised.

Recognising that after China, India is emerging as the next major destination for metals consumption, several global players are keen to enter the Indian market with sizeable investments, but are sceptical of the policy environment. The National Mineral Policy (NMP), which, among other things, seeks to remove investment bottlenecks, has been hanging fire for some time now and is not without its critics. The Centre has been petitioned against finalising the policy without adequate stakeholder consultation. It is important that the long-term policy takes into account the often conflicting demands of producers, consumers and exporters, not to mention State governments, environmentalists and foreign investors; and judiciously reconciles them. But that’s not all. As energy is a critical input for the industry, creeping energy deficiency can potentially check growth acceleration. Additionally, the industry must seriously address the issue of reduction in carbon footprint.

For the minerals and metals sector, currently, one of the most contentious issues is the policy on iron ore export. According to government estimates, India has sufficient resources of iron ore (25.25 billion tonnes), and production (180 million tonnes) far exceeds the current domestic demand (60 million tonnes). Only the surplus is exported (90 million tonnes) without starving the domestic steel industry, and sizeable foreign exchange is earned (Rs 15,000-Rs 16,000 crore). It is logical to expect, in the coming years, that gradually rising domestic consumption will automatically result in gradual contraction of export surplus. Clearly, we are unlikely to face paucity of genuine export surplus anytime soon. There already are fiscal (customs duty) and other restrictions (canalisation of certain grades) on iron-ore export. Even a high-level committee on NMP has concluded that there is no need to impose any quantitative restriction on exports. But the position should be revisited after 10 years, a reasonable time-frame for iron-ore producer-exporters to readjust their business.

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