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Steel ministry concerned about allocation of mines to companies

Steel ministry concerned about allocation of mines to companies
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First Published: Tue, Apr 10 2007. 12 53 AM IST
Updated: Tue, Apr 10 2007. 12 53 AM IST
New Delhi: Ahead of a group of ministers (GoM) meeting on the National Mineral Policy on Wednesday, the steel ministry has voiced concerns over the allocation of mines to steel producers.
The committee that drafted the policy was chaired by Planning Commission member Anwarul Hoda and attempted to boost investment into India’s mining sector. But “the Hoda report is not explicit how it proposes to give mines for value-addition and we have sent our comments”, said a ministry official. The allotment of captive mines and competitive bidding of coal blocks, among others, is likely to be discussed by GoM, headed by home minister Shivraj Patil.
The Hoda committee has maintained that preference of iron-ore reserves should be given to companies that were set up before 1 July 2006. Its report recommends that iron-ore mines be given to investors only within the state “as a one-time measure to provide a level-playing field”.
Most mineral-rich states favour utilizing iron ore within their borders to support steel plants, which represent large investments and employment. The inter-state transport of iron ore is likely to form the core of the ministerial discussions as companies without their own mines push for it.
At present, three companies —Steel Authority of India Ltd, Tata Steel Ltd and Jindal Power & Steel Ltd—own captive mines while integrated steel producers such as Essar Steel, JSW Ltd and Ispat Industries Ltd don’t. According to an executive at a large steel firm, companies that own captive mines spend roughly Rs250-300 per tonne to extract iron ore. On the other hand, firms without captive mines spend Rs2,400 per tonne, as prices of iron ore jumped 9.5% last week. The prices shot up after Chinese steel maker Baosteel decided to buy iron ore from a Brazilian firm Compania Vale do Rio Doce, setting a new price benchmark.
The steel industry is both capital- and labour-intensive, and has a gestation period of at least five years. “It costs Rs3,000 crore to set up a one million tonne plant. We can’t shift a plant,” he said.
Officials also worry that if captive mines aren’t given to companies without mines, investment will be pulled away from the state, sending the government’s 2020 production plan of 110mt, now unofficially revised to 175-180mt, awry.
The report is an outcome of 10 months of deliberations among plan panel members, steel and mines secretaries, principal secretaries of Orissa, Jharkhand, Karnataka, Chhattisgarh and executives such as Tata Steel managing director B. Muthuraman.
Steel investors have signed some 156 agreements with state governments in the hope of securing captive mines, which substantially reduce cost of production. In 2005, the steel ministry set up a committee, which favoured allocation of mines to steel producers.
But mining lobbies oppose the move on the grounds that this thwarts the growth of the mining industry. It maintains that iron ore should be purchased at international prices. Jharkhand, Orissa and Chhattisgarh have signed preliminary pacts with nearly 141 potential steel investors, all hoping to access captive mines.
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First Published: Tue, Apr 10 2007. 12 53 AM IST