Piyus Goyal, India’s mines minister said during his times the mining industry’s contribution to gross domestic product could be raised to about 3.5% from the then-prevailing 2.4% in the next few years, by annually raising minerals output. The idea was that rapid development of the sector by stepping up private and government investment in exploration, prospecting and mining would be a sure way of creating more wealth for the nation and economic opportunities in relatively remote rural areas.
It was not lost on the government that prosperity and welfare of the country’s large population are an effective tool to fight extremism, which has taken root in parts of the minerals-rich countryside. There have been instances of extremist groups sabotaging efforts to open iron ore mines in Chattisgarh and bauxite mines in Andhra Pradesh, for example.
The Indian mining industry’s share of national GDP was actually down to 2.1% in the year ended March 2018. Next only to coal, in which India’s production is well over 600 million tons per year, iron ore makes the largest contribution to the country’s minerals basket. And after years of setback in the production of iron ore, since it hit a peak of 218.55 million tons in 2009-10 as exports to China boomed then, output once again exceeded 210 million tons in 2017-18 .
India’s iron ore production and trade*
Year Production Export Import
2009-10 218.55 117.37 0.89
2015-16 155.91 4.50 7.09
2016-17 192.08 30.48 4.60
2017-18 210.47 20.99 8.70
2018-19 (full year) 210.00 (11 months) 14.15 (11 months) 12.64
The country’s iron ore production and exports fell to a low of 156 million tons and 4.50 million tons, respectively, in 2015-16, impacted in part by the government’s decision to impose a punitive export duty and further by restrictions on mining in some areas because of environmental concerns. Other difficulties included land acquisition and the complexities involved in satisfying both environmental and forest regulations.
India, which remains the world’s fastest growing economy with the IMF anticipating GDP growth at 7.3% in 2019-20 and 7.5% next year, was a hot destination for foreign direct investment in 2018, amounting to over USD37.76 billion in 235 deals. Nevertheless, though a precise figure for the mining sector is not available, industry officials say the mining sector, including iron ore, has not attracted any significant foreign investment in recent years. Foreign groups generally do not seem to find the ground reality inspiring to put their money into Indian mining.
In the meantime, pressure is building on the government that, in pursuit of the objective of the national mineral policy of “rationalizing reserved areas” held by PSUs, Steel Authority of India Limited (SAIL) and the country’s biggest iron ore producer NMDC should be made to surrender the “undeveloped iron ore blocks in their possession.” Contesting the demand, both SAIL and NMDC maintain that, although their present ore production may not be in alignment with their mining capacity and reserves, they have ambitious plans for the future. For example, NMDC has a target to produce 100 million tons of ore by 2030-31 by comparison with 35.5 million tons in 2018-19. NMDC chairman Baijendra Kumar says “people, however, believe we are capable of producing 150 to 200 million tons of ore.” JSW Steel managing director Sajjan Jindal, for example, believes that NMDC has technical and financial prowess to achieve production capacity of 200 million tons in the course of time.
NMDC is in the last lap of commissioning a 3 million tonne per year steel mill at Nagarnar in Chattisgarh. Vedanta recently acquired a 2.5 million tonne per year steel plant in Jharkhand and wants to raise its capacity to 5 million tons per year.
“The country has missed an opportunity to monetise pithead stocks by not removing export tax. Moreover, as most of our mines are small, mounds of stocks are interfering with their production,” says Sharma. An Orissa-based merchant miner says: “The 30% duty that robs Indian ore of price competitiveness in the global market has not allowed us to reap benefits from the January tailings dam disaster at Brazil’s Vale and production disruptions in Australia due to March cyclonic storms.” Beside export tax, under court order the mines in Karnataka are not allowed to export iron ore. In addition, pellets made in the state using local ore cannot be sold in the world market.
It is no wonder then that, between April 2018 and February 2019, India could export only 14.15 million tons, by contrast with 20.99 million tons in 2017-18. In the first 11 months of 2018-19, strong demand from coastal mills, particularly in Karnataka, led imports to rise to 12.64 million tons, against 8.70 million tons in the full year of 2017-18. Karnataka-based mines complain that the state’s coastal mills are importing iron ore with the “sole objective” of keeping the prices of local ore down. High imports are hurting Karnataka miners since the court order restrains them from selling iron ore in other parts of the country. India’s ore production in 2018-19 is estimated at 210 million tons, more or less the same as the 210.47 million tons in 2017-18. Unfettered exports will help the industry to clear pithead stocks and lift production at the same time, says Sharma.
Report By: Naeemeh Ferdowsi
