National Mineral Policy 2006 - Department of Mines

price, reduce profitability, and put many of the mines, particularly those in the SME sector,out of business. The mining sector would like the user industry to pay international prices foriron ore. It has been argued that iron ore is not in short supply regardless of how fast thedemand for steel grows because conversion of resources into proven reserves is simply afunction of exploration which will inevitably occur if demand for iron ore rises. They alsoargue that supply of iron ore at prices lower than international prices is not necessary for thesteel industry to flourish, as is proved by many steel makers in India and the steel industry asa whole in the world. They further argue that value addition and the multiplier effect have norelation to export because a steel industry based on iron ore at market prices will inevitablycome up if the demand for steel so dictates. It is not necessary to give up export earnings,jobs, and revenues from the mining sector because once steel units come up exports willautomatically fall and the value addition from steel units with all its attendant benefits willfollow.7.51 The mining industry also draws attention to the important regional implications ofexport policy, especially on employment. A very substantial proportion of the iron oreproduced in the south-western states of Karnataka and Goa is exported. There areimpediments in the establishment of steel mills in that region on a significant scale because ofinfrastructure problems. Transportation to the eastern region where the steel plants arelocated is not economical because of the long haul, and much of the steel capacity therealready has access to captive mines. The mining industry also believes that the currentdemand for exports is due to a surge in China’s demand and a spot market has got createdbecause of a temporary boom in that country. Iron ore fines are lying in dumps in the countryfor lack of domestic demand and the temporary boom presents a good opportunity to disposeof the surplus.7.52 The Committee carefully weighed the arguments of both sides and, in making itsrecommendations on export controls on iron ore, took a number of considerations intoaccount, as detailed below.SCARCITY OF RESOURCES ARGUMENT7.53 While the Committee recognised that iron ore resources are finite and exhaustible ittook into account the conclusion reached in the previous section that on the presentassumptions of demand and supply and the expected rate of growth, the resources in thecountry would last until the end of the twenty-first century. It is possible that the demand162