National Mineral Policy 2006 - Department of Mines

Mineral Foundation, have argued that iron ore mining is a major industrial activity in thesestates, employing lakhs of people directly and indirectly, and if iron ore is to be reservedexclusively for captive miners, the local economy would be drastically affected. The firstthree groups are all against SME mining, arguing that in the absence of economies of scale,mining activities of SMEs result in suboptimal mining, greater pressure on existing publicutilities, and environmental degradation.7.21 As mentioned earlier, in 2005 the Ministry of Steel had set up a committee chaired byR. K. Dang for framing guidelines for preferential allocation of iron ore MLs to steel makersand the Committee submitted its Report in August 2005. The Committee was of the view thatiron ore was a scarce commodity, and for that reason iron ore mines should be allocated tosteel producers in accordance with a hierarchy, with PSUs at the top followed by existingprivate sector producers, new private sector players, foreign investors, and stand alonemining companies, in that order. FIMI, which was represented on the Committee, hadsubmitted a note of dissent, arguing that the approach of rationing out mines among users wasa reversion to the licence–permit system that the country had given up after the introductionof economic reforms in 1991–92. In its view, there was no shortage of iron ore eithernationally or internationally and for a thriving steel industry there was no need to give accessto iron ore at extraction cost. FIMI has also pointed out that the Ministry of Mines did notassociate itself with this committee. In fact, while the Ministry of Steel has supported theDang Committee report the Ministry of Mines submitted a copy of its Policy Paper inSeptember 2005 on the Allocation of Iron Ore Mines prepared by a committee headed by theJoint Secretary, which included representatives from the GSI and IBM. The Policy Paper hasdealt with both the issue of resources and also the concept of captive mining. This paper tookthe view that on the present reckoning, iron ore is not a scarce commodity in the long termbecause a great deal of exploration work is still to be done. It disagreed with the DangCommittee’s recommendation of rationing out ore bodies explored by GSI and MECL tosteel makers and recommended that all those engaged in mining should be treated as minersregardless of whether they are stand alone or captive and the end use of their produce shouldbe determined by the forces of demand and supply rather than by the government. It alsoargued that cheap iron ore to some steel makers through captive mining as a specialdispensation was not justified since all iron ore is only used for steel making and steel makersshould buy their iron ore from the open market by paying market prices. It did notrecommend any change in the current dispensation, which treats all miners alike.147