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India should process raw material and add value

Mr Shushim Banerjee DG of INSDAG in an article in Financial Express said that our discussion on the issue of iron ore last week has got a little complicated with the order issued by Indonesia to ban all exports of unprocessed raw materials (gold, silver, copper, nickel, zinc, iron ore, chromium, bauxite and six others) with immediate effect. As a part of this order, the units submitting specific plans for value addition by 2014 would be permitted to export with 20% duty.

Although detailed guidelines from the government are yet to be issued, the inherent principle of preserving the natural resources is quite apparent.

The debate currently raging in India relates to continuation of exports of iron ore, stated to be mostly of fines. As there was no adequate facility of beneficiation and pelletisation available indigenously, nor there was any elaborate programmes drawn out by the steel producers for processing of fines and making them usable for the blast furnaces, the exports of iron ore continued unabated. Things have changed in the last few years when raw material security occupied the predominant place for any strategic thrust by the steel producers. That unrestricted exports of natural resources are not to be permitted has largely been perceived by the decision making authorities in the country. Restricting exports of iron ore by enhancing railway freight for export cargo and imposing tax firstly at specific rate and subsequently at ad valorem rate had marginal impact. Although the current price of iron ore with 63.5% Fe at USD 145 per tonne CFR, China provides adequate realisation to the miners, but these are much lower than what these units are used to fetch all these years. Can India draw a lesson from the recent steps in Indonesia?

Resource nationalisation is being pursued in a variety of ways in the recent period. For instance, Bolivia terminates a part of the deal with JSPL for delaying investment in mines and steel plant. Mongolia, Afghanistan, Guinea, Mozambique are all insisting on value addition within the country before the resources are taken out for exports. China has put in a quota system and enhanced duties on export of nine major raw materials including rare earths of which it is the major supplier. Though USA and EU have taken China to WTO Dispute Settlement Body for violating its WTO accession commitment and WTO guidelines on free and fair trade, restrained export of natural resources by China still continues.

Are we doing enough to create facilities for beneficiation, pelletisation of our low grade fines so as to make a strong case for restraining exports? While Essar, SAIL, JSW and JSPL have initiated programmes for value addition of iron ore, more concerted efforts are necessary. NMDC, the major producer of iron ore in the country has to set up more facilities for processing of iron ore for value addition for use by steel industry. The continued slowdown in the mining sector (- 2% growth in 2011-12) is a sad reminder that lots need to be done to explore fresh mines, process the raw materials within the country to add value before exporting the same.

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