National Mineral Policy 2006 - Department of Mines

projections of the Ministry of Steel do not prove valid and the country replicates the rate ofeconomic growth of China and the domestic demand for steel grows much more rapidly thanwhat can be visualised today. In that event, a review of the policy would be called for. For thepresent, there does not appear to be justification for prohibiting exports of iron ore from theperspective of availability or rate of depletion of reserves. According to the National SteelPolicy, 2005 document, annual export of iron ore, which is currently at 78 million tonnes, islikely to grow to about 110 million tonnes by 2020. If this estimation holds good thedepletion of iron ore resources resulting from exports 10 years from today, after which wehave suggested a review, would be between 0.8 and 1.0 billion tonnes, out of the currentresources of 23.58 billion tonnes.VALUE ADDITION ARGUMENT7.54 While it cannot be denied that value addition from steel is more than value additionfrom iron ore alone there is no basis for comparing these two value additions because they arenot mutually exclusive. All iron ore extracted is used for steel making, so the value additionin producing steel is over and above the value addition in the extraction of iron ore. If localiron ore demand rises, exports will automatically fall, but if there is no increase in localdemand and export restrictions are put in place then there will be no value addition eitherfrom steel making or from mining. The value addition argument of the steel industry couldhave been supported if there were no value addition in mining at all. However, this isobviously not the case. There is value addition and employment generation in mining andrelated processing and in transportation activities flowing from mining operations. In fact, ifthe value addition per unit of capital employed in mining were estimated, it is likely thatproductivity in iron ore mining would be higher than in steel making. Nevertheless, if it werea clear choice between exporting iron ore or finished steel at the same point in time therewould be no doubt where the policy choice should fall. However, the argument really is alsothat iron ore should not be exported today so that more steel can be exported tomorrow. Bythe same token it could also be argued that we should not be producing steel for exports todayand wait until we can add value further and export automobiles or white goods or products ofother industries that can add value to steel. The problem is that there is a need to stimulateeconomic growth, provide employment, and also look for opportunities for earning foreignexchange today. The mining sector must grow if the country has to reach a GDP growth rateabove 8 per cent. After many decades of stagnation, international iron ore prices have been ata historically high level over the last two years or so, and the time is not opportune for puttinga ban on exports of the commodity.163