National Mineral Policy 2006 - Department of Mines

and hence this ore should be conserved and allotted only to local steel mills to ensure longtermsupplies. Another justification given is that there is a need to balance the disadvantagesfaced by the steel industry in respect of freight costs, financial costs, and the cost of the othertwo raw materials used in steel making, viz. coking coal and energy. Coking coal has to beimported at international prices, which are currently at a high level. The cost of energy inIndia is much higher than the cost of energy abroad. It is argued that the higher costs in Indianeed to be neutralised by giving direct access to steel mills to the mines so that such mills canget iron ore supplies at the cost of extraction (US$ 5–10 as compared to the peak market priceof US$ 50). It is stated further that the value added by the steel mill to the economy as awhole far outweighs the price advantage obtained by it by getting the raw material at costrather than at market price. As the steel industry is the engine that drives manufactures insome key areas such as automobile, machinery, white goods, appliances, and construction, itis necessary that the production of steel benefits from supplies of cheap iron ore and finishedsteel is made available in turn at international prices to manufacturers and builders. Thegroup has drawn attention to the report of the Dang Committee set up by the Ministry of Steelin 2005 for framing guidelines on preferential allocation of leases for iron ore mines. TheDang Committee had made detailed recommendations concerning captive and non-captivemines, giving priority to steel producers over commercial miners. We shall return to therecommendations of Dang Committee later. The group further argues that historically, steelproduction has developed in Western countries on the basis of captive mining. Steelproduction first started in the US and Europe on the basis of captive mines for iron ore andcoal. New mines were developed in Australia, Brazil, and other countries and the process ofcommercial exploitation of iron ore and coal started. Looking at countries that have got ironore and coal and a sizeable domestic market, the Committee finds that their steel producershave captive mines, for example Baosteel (China); Defasco (Canada); Severstal (Russia);Kirivorog (Ukraine); and Companhia Siderurgica Nacional (CSN) (Brazil). Companies thatdo not have captive mines or have small holdings that are not adequate for theirproduction/expansion are going in for acquisition of iron ore mines in other countries.Arcelor, until recently the second largest steel company in the world, has acquiredCompanhia Siderurgica de Tubarao (CST) (Brazil) and Defasco (Canada), both of whichhave captive iron ore mines. Mittal Steel has acquired Krivoyrog for its iron ore mines.Thyssenkrupp (Germany) has acquired Companhia Siderurgica do Atlantico (CSA) (Brazil).Pohang Steel Company (POSCO) has now come to India in search of captive mines. Thus, inthe view of this group, captive mining is a growing phenomenon.144