Global hunt for resources

If there is one lesson India learnt, rather belatedly, from the uncertainties in exploiting mineral resources such as coal in the eastern States, it was that firms could always access resources in other countries. Power and steel companies, even public-owned ones such as SAIL and NTPC, have been scouting for coal and other energy assets from sources as geographically widespread as Russia, Australia and Latin America. The state-owned NMDC, the country's third largest mining company, journeyed to Russia for coal assets in Yakutia, Siberia; ironically, even Coal India, whose problems contribute significantly to shortages in domestic coal supply, is hunting for global coal assets, not the least because there is profit to be made from selling it to the resource-starved power companies unable to hunt on their own.

Needless to say, India is not the only mineral-deficit country seeking global resources. China has been in the game too, using its vast trade surpluses to spend lavishly in acquiring mineral assets from oil to coal and rare earths. A study now points out that India spent more than China in acquisitions in 2010; for the first time, Indian firms put together have spent more than their Chinese counterparts, which have perceptibly slowed down their buying abroad in the current year. This is hardly surprising, considering China is applying the brakes on its growth pace, with authorities keen to cope with rising inflation — though not as high as India's — that touched 4.9 per cent in January. The Chinese apex bank was forced to raise reserve ratios for banks to allow the yuan to appreciate; manufacturing too has contracted since the second quarter of 2010, as have exports. Unsurprisingly, the hunt for mineral assets has slowed down in contrast to India, where the growth forecast is still buoyant in the face of inflation that rules at double the Chinese rate. But too much should not be made of this sprint ahead by India last year.

In the world market China annually buys 25 per cent of the world's supply of base minerals; unlike Indian policymakers, or the western ones for that matter, the Chinese plan ahead for a decade, and have built trade and investment links with African countries using their dollar reserves to buy into that continent's vast, untapped mineral wealth. So when Chinalco, the state-owned aluminium giant, failed to acquire Rio Tinto in Australia, China's pride may have been hurt but not its goal of hedging its raw material demand with readily available, on-the-cheap supplies. That Indians spent more in 2010 sounds grand but means little. Indian firms may invest in other companies but China invests in a country.

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