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Ratan Tata urges PM to halt iron ore exports

Ratan Tata urges PM to halt iron ore exports
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First Published: Fri, Feb 22 2008. 11 59 PM IST

Updated: Fri, Feb 22 2008. 11 59 PM IST
New Delhi: Ratan Tata has written to Prime Minister Manmohan Singh, saying the export of India’s mineral resources, including iron ore, without adding value “should be avoided in all costs”.
Tata has written the letter in his capacity as chairman of the Investment Commission of India, a three-member body set up by the finance ministry to promote India as an investment destination for overseas companies. He is also chairman of Tata Steel Ltd.
Steel companies and ore producers have been locked in a battle over exports. Steel makers want exports banned and the ore used for local production. Ore producers want exports to continue, given rising demand for the commodity in overseas markets.
In an interview with Mint last year, T. Mukherjee, then deputy managing director of Tata Steel, had said: “Export of iron ore must be banned as the country’s resources are not infinite.” Steel makers such as Tata Steel have their ministry’s support. The Union steel ministry has recommended that the finance ministry impose a 15% export duty on iron ore. It is not known whether the finance ministry will respond positively to this in the Union Budget that is to be presented on 29 February.
Ore concerns: Ratan Tata has written the letter in his capacity as chairman of the Investment Commission of India. (Madhu Kapparath / Mint)
In his letter, which has been reviewed by Mint, Tata said several international firms, such as Posco and ArcelorMittal, and domestic firms such as the “Jindals, Essar and Tata Steel” face project delays as they await the clearance of mining leases.
Tata added in the letter that the commission felt ore export “would not be in the country’s long term interest” and risks “depleting the country of globally diminishing mineral resources.” The two other members of the commission are HDFC Ltd chairman Deepak S. Parekh, and Firstsource Solutions Ltd chairman Ashok Ganguly. Ganguly referred questions to a Tata representative. Parekh did not respond to emails or calls for comment.
A spokesman for the Prime Minister would not confirm or deny receipt of the letter and referred questions to Tata. Multiple phone calls to Tata representatives went unanswered.
A senior government official requesting anonymity confirmed the authenticity of the letter.
This is not the first time Tata has spoken out in his capacity as chairman of the Investment Commission about a business in which he has interest. On 3 April 2006, Ratan Tata wrote a letter to the Prime Minister and the telecommunications secretary asking the government to allocate spectrum for Rs1,500 crore instead of the then policy of serving it free to the operators. Tata Indicom, part of the Tata group of companies, is one of India’s largest telcos.
Trade body Cellular Operators’ Association of India had opposed the suggestion saying the industry would go bankrupt if such a fee was levied. Senior executives criticized Tata for making the suggestion.
The finance ministry slapped export duties on separate ore grades last year. Steel requires the key ingredients of iron ore and metallurgical coke, most of which India imports from China. Prices of iron ore, the key material in steel making, have shot up 150% last year and long-term prices are slated to rise by 65% from April this year to $78.90 (Rs3,148) a tonne, setting the benchmark for spot price sales.
To bring prices down, steelmakers have been seeking a ban on iron ore exports, and have been opposed to recommendations of a new national mineral policy. The policy says setting up a steel plant is not a precursor to securing access to a mine. The policy is currently pending cabinet approval.
Tata’s letter said efforts should be made to attract investments in plants that will add value to minerals. Tata Steel stopped exporting ore in 2006, despite having several captive mining leases, three in Jharkhand and five in Orissa.
The scramble for iron ore has pulled steel companies in different directions—those who own or have access to mines and those who don’t. Tata Steel and the government-run Steel Authority of India Ltd have the largest number of mining leases.
Steel is a capital-intensive industry and it currently needs 80 million tonnes of iron ore, only half of India’s production. The rest is imported.
“If India bans (export of) iron ore tomorrow, and China bans export of coke, world trade is going to be in tatters,” said Naveen Vohra, partner at audit and consulting firm Ernst and Young. “Ultimately it boils down to a protectionist argument.”
Pankaj Mishra contributed to this story.
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First Published: Fri, Feb 22 2008. 11 59 PM IST
More Topics: Ratan Tata | Iron ore | Export | PM | Letter |