Tuesday, February 26, 2008

A Serious Blow for Goa’s Mining Industry

A Serious Blow for Goa’s Mining Industry
by Nandkumar Kamat

As if the injustice done to Goa over the Mhadei water diversion issue was not sufficient the central government has added another insult to the injury. The draconian iron ore export duties announced by the union finance minister is a mortal death blow to Goa’s sixty-year old mining industry. With a single stroke the central government intends to collect about Rs 1100- 1200 crores annually from Goa. Unless it clarifies that the duties are limited to ores with 65 per cent or more Iron content, as originally suggested by Hoda committee, Goa’s mining industry would not get any relief. The logic behind imposition of the export duties is mischievous.

The central government has been totally misled on this issue. It intends to project a demand supply scenario for 2019-2020. But by that time cheaper and durable new materials like Carbon composites and nano technology based , rustproof, flameproof intelligent materials stronger than steel would appear in the market. So there is no guarantee that the current boom in the steel market would be sustainable. The Chinese appetite for Iron ore would be reduced after Beijing Olympics and the completion of the massive three gorges dam project. Demand supply cycles for commodities like steel are unpredictable. Besides, over the time span of next 15 years bio-mining, bio-leaching, bio-beneficiation technologies would be so advanced that most of the Iron ore mines would be using environmental biotechnology. In fact, low-grade ore beneficiation is an area which the central government intends to throw open for foreign mining giants. So the fear of depletion of Iron ore reserves is imaginary. India has proven iron ore deposits of 24 billion metric tonnes (BMT). Of these 50 per cent are haematite ores. The government expects a domestic steel production capacity of 180 million metric tones (MMT) by 2020. The iron ore requirements would be 190 MMT. This demand can be easily met without banning the iron ore exports or imposing export duties.

Australia and Brazil continue to use latest mineral prospecting technologies to discover new iron ore reserves. Billions of tones of Iron ore reserves in India are yet to be discovered. So the argument of Indian steel makers does not hold water. But they have used their well organized lobbying power with the government, political parties and trade unions to create a favourable ground for themselves. Union ministers are making apparently contradictory statements. In July 2006, speaking at Bhubhaneshwar, Orissa, the Union Minister of State for Commerce, Mr Jairam Ramesh had urged the Centre to stop Iron ore exports after 2010. In August 2006, the Steel Minister, Mr Ram Vilas Paswan had also favoured curbs on such exports. Within five months, Mr Ramesh changed his position and took a more realistic view. In his reply to Rajya Sabha question number 201 from CPI-M MP, Mr K Chandran Pillai, on December 6, 2006 Mr Ramesh said: “ India will continue to export iron ore as production outstripped domestic demand and future reserve accretion will suffice to meet projected demand and export obligation. The existing iron ore export policy regulates and promotes judicious use of iron ore for domestic purpose and export of surplus quantity.

Production of iron ore is in excess of current domestic demand. With increased prospecting and exploration and new investment in mining, India’s iron ore reserves will increase to comfortable levels to meet domestic requirement and export obligations. “MPs from Goa must study this statement. India had a surplus of eight million metric tones of iron ore in 2005-06 after meeting the export and domestic demands.

On December 22, 2006 , the Anwarul Hoda high level committee, on the National Mineral policy, submitted its’ report to the Planning Commission. People concerned about the future of mining industry of Goa may download this 307 pages report from Commission’s website. Chapter seven is relevant to iron ore industry and Goa. The Finance Minister conveniently sidetracked all the other issues and only used a single statement from Hoda committee report to announce the export duties. The Committee had concluded: “There is no need to impose any quantitative restrictions on exports but that the position should be revisited after 10 years. However, by way of abundant precaution, the Committee recommends that an export duty may be levied on exports of iron ore in lump form with Fe content above 65 per cent. “Goa’s politicians seem to be making statements without reading this excellent report. Goa government needs to study the Hooda report and do whatever it can do to exclude Goa’s iron ore from export duties and permanently block any move to ban Goa’s iron ore exports in future. There are several favorable points in Hoda committee report to argue the case of Goa’s miners. Hoda report says, “mining sector must grow if the country has to reach a GDP growth rate of above 8 per cent. After many decades of stagnation, international iron ore prices have been at a historically high level over the last two years or so, and the time is not opportune for putting a ban on exports of the commodity.”

Hoda committee opposed ban on iron ore exports. It was of the view that “A restriction on exports would straightaway hit half the iron ore mining industry, and many mines, particularly in the south-western region, may have to close down. In addition, export of iron ore provides employment on a large scale to the people of Goa, Karnataka, as well as in the SME (small and medium enterprises) and larger mines in the eastern and central parts of the country and is a significant catalyst of socio-economic development in the backward and tribal belts.” The committee had assessed the increase in production over the last three years has been mainly from the non-captive SME mines and is export-driven. Apart from mining proper, associated sectors such as transportation, ore handling, minor and major ports, and service providers such as shipping lines and vessel yards all gain from the export activity. Employment-wise, if exports are banned 70,000 persons will become jobless, and due to tertiary sector linkages, at least half a million more would lose their livelihood. For this reason alone, any severe restriction or ban on exports of iron ore is not conceivable.”

As for Goa, the NCAEOR report of 2002 had shown that the net social profit from mining is between Rs 183 to 202 per tonne. For 2005-06 this works out to be Rs 675 crore, or Rs 50000 per capita. The export duty would kill the local mining industry. Trade unions and political parties must therefore oppose the draconian duty. The Goa assembly must pass a strongly worded resolution on this issue to send a right message to the Centre.

No comments: