Iron ore policy on the anvil

NEW DELHI: The government may give preference to domestic steel companies to avail domestic iron ore while allowing exports of the raw material by mining firms. A policy in this regard is expected soon.

The Group of Ministers (GoM) has said the National Mineral Policy should protect the long-term interests of the country through policy support. The GoM is meeting on Friday to conclude its discussions on the new policy so that it can be tabled in the monsoon session of Parliament.

The GoM chairman and home minister Shivraj Patil has also said there is need to evolve a balanced policy which addresses various sectors of the industry and also protects the long-term interests of the country.

The GoM is convinced that the new policy should work towards long-term interests of the country. This would imply that value addition (steel making) will be given preference over export of basic raw material. “If the thought finds any form in the policy, it will give a big boost to creation of additional steel making capacity in the country,” said an official source.

Sources said while GoM may not suggest a complete ban on export of iron ore, it would definitely recommend changes in the policy that gives preference to steel making while allotting iron ore mines. Existing mining companies may also be asked to set up steel making facilities rather than continue with export of basic ore.

The Karnataka government has already indicated that it will give preference to companies undertaking steel making while granting fresh mineral leases. Orissa is also thinking on similar lines. Looking abroad, even China has restricted export of coking coal to reserve the material for steel companies.

On captive mining, there is already a consensus in the GoM that recommendations of the Hoda Committee should be implemented with minor changes. This will mean that all existing steel capacities may be given captive iron ore mines. The GoM is also likely to take up the contentious issue of iron ore export. The ministry of mines has been asked to present a discussion paper on this subject. The mines ministry is in favour of continuation of exports without any restrictions. Exports have reached a level close to 100 million tonnes (mt) on a total production of 165 mt.

Sources said the steel ministry may come up with a new formula under which iron ore reserves required to support 200 mt of steel production may be reserved for value addition within the country and the balance allowed to be exported. This will be gradually implemented till steel capacity reaches 200 mt level by 2020.

“The steel capacity is likely to grow to 80 mt by 2012 requiring 130 mt of iron ore and to 200 mt by 2020 requiring 360 mt of ore annually. If iron ore resources are reserved keeping the growing steel production in mind, there will be no problem if balance ore is exported,” said an official source.

With reserves of about 25 billion tonnes of iron ore, there is a feeling that aspirations of both mining and steel companies can be met adequately for a long time. Moreover, surveys are already going on to increase country’s resource position.