A government report to be presented to the empowered group of ministers this week suggests steel producers with their own mines should stop exporting iron ore.
The decision affects at least two steel companies, including Jindal Steel & Power Ltd, headed by member of parliament Naveen Jindal, and JSW Ltd, which exports iron ore through a joint venture (JV) with another company.
These companies fall right in the middle of the debate waging between iron ore producers and domestic steel plants. The latter have been trying to keep much of India’s 23 billion tonnes in iron ore reserves within its borders to support the growing steel industry. But iron ore exporters say they can get better prices overseas.
Iron ore is a key ingredient in steel production and several states that have lured billions of dollars from steel investors for projects in their areas need to ensure they have enough of the precious resource to keep plans moving forward.
In the middle of last year, a committee of ministers was set up to examine the issue of India’s iron ore exports. Its report asks for a review of exports every five years instead of the 10 years recommended by the mining industry. The committee’s ideas will be presented to an empowered group of ministers, headed by home minister Shivraj Patil, on 11 April when the group is slated to meet and discuss the mineral policy.
Captive mines, or mines held by manufacturers themselves, were primarily given to help add value to the reserves and boost the country’s steel production. But as worldwide demand for steel has grown, fuelled mostly by fast-developing China, iron ore producers have also found demand for the raw material itself. Last year, India exported 90 million tonnes (mt) of iron ore.
The behemoth Tata Steel Ltd, which has several captive mining leases, already stopped exporting iron ore last year. Its mines include the 2,866-acre Nuamundi mines in Jharkhand and more than 4,000 acres in Orissa’s Bamebari and Khandabanda mines.
“Export of iron ore must be banned as the country’s resources are not infinite,” T. Mukherjee, deputy managing director of Tata Steel, said in an interview during a steel summit in the Capital recently.
The Rs2,900 crore Jindal Steel has a captive mine in Tensa, Orissa, and recently secured a mining lease in Bolivia. The company exported nearly 1.5mt of iron ore from Paradip port between 2005 and 2006, up from 1.1mt in the previous year.
JSW does not have any captive mine of its own, but has a JV with the Karnataka government’s Mysore Minerals Ltd for two mining leases in the Bellary Hospet region. The company exported four lakh tonnes of pellets between 2005 and 2006. The year before that, it shipped out some seven lakh tonnes of pellets.
Neither Jindal Steel nor JSW returned Mint’s calls for comment.
But an industry representative said they will heed the committee’s advice and cease exports.
“The two companies will stop export totally and we continue to stand for reduction of iron ore exports in tandem with the growth of domestic steel industry,” said Moosa Raza, president of Indian Steel Alliance, an association of six steel makers that includes Jindal Steel and JSW.
The steel lobby has been seeking a phased ban of iron ore imports, seeking a reduction of 15% every year.
But a mining industry representative called this stance a “double standard”.
“On the one hand it’s seeking a ban, on the other hand steel companies are exporting iron ore,” said R.K. Sharma, the secretary general of Federation of Indian Mineral Industries, which represents some 400 mining companies.
The federation has been pressing for removal of the recent export duty on iron ore. A levy of Rs300 per tonne was imposed from 1 March, a matter on which the mines ministry said it was not consulted.
According to an official in the mines ministry, the Hoda committee examining the mining policy has not recommended a complete ban, but sought a levy on the export of high-grade iron ore, or haematite, with 65% iron content.
Since the duty was imposed, there has been a drop in exports by 40% compared with the same month last year. Of the total iron ore exports, nearly 70% consists of fines, a powdered residue of iron ore that is used to make the ring-sized pellets needed to make finished steel.
The group of secretaries has also urged that new technology must be introduced to utilize the fines better.