National Mineral Policy 2006 - Department of Mines

7.42 Despite the fact that SME mining is suboptimal, puts pressure on public utilities, andis not environment friendly, the SME sector represents almost 40 per cent of the current ironore mining industry. Therefore, the SME sector comprising stand alone miners will have tobe helped to overcome bottlenecks so that they become efficient miners. This can be donethrough a combination of regulatory and development measures. Unless stand alone minersare encouraged to produce and sell ore to local users in the market, both SME miners as wellas the downstream SME operations (sponge/pig iron units) will suffer.VIABILITY AND THE MULTIPLIER EFFECT7.43 As mentioned in paragraph 7.16 above, it has been claimed before the Committee bythe Indian Steel Alliance 4 and steel producers that iron ore at extraction cost yields substantialsavings, which are required for setting off against the high cost of infrastructure, freight, andenergy to make steel making a viable operation in India. However, this claim is contested bysteel makers who do not have captive mines and have to buy their iron ore at market pricesbut are still operating viably and making good profits. Their support for captive mines isdriven more by the need for a level playing field than by any need for cheap or free iron ore.Even if it is true that there are steel mills in the world that have captive mines the Committeeis also aware that the large steel makers of Japan and Korea purchase their iron ore on longtermcontracts from countries such as Australia and Brazil and are highly efficient in theproduction of steel. Hence the Committee concludes that viability of steel mills in generalcannot be linked to captive mining.7.44 As mentioned in paragraph 7.16, it is argued that the downstream use of steel isfundamental to much of manufacturing and infrastructure and if the multiplier effect of steelon downstream industry is considered then the value addition potential of steel is immense.However, the concern of the downstream user is not so much with the source from which thesteel comes as with the price at which it comes. If the price at which steel is sold is the(international) market price then it does not matter to the downstream user as to whoproduces the steel and whether the steel is imported or purchased locally. Thus the multipliereffect cannot be an argument for allocation of iron ore mines exclusively to steel mills.4 A representative body of the five primary steel producers in the country, namely SAIL, Tata Iron and Steel CoLtd (TISCO), Essar Steel, Jindal Vijayanagar Steel, and Ispat Steel.158