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Ministries clash on iron ore export goal

While the government is trying to drastically reduce the export of iron ore and instead increase the export of highvalue finished goods, the commerce ministry has quietly doubled its target for iron ore exports.

S.P.S. Pannu | May 7, 2011 | Updated 09:45 IST

While the government is trying to drastically reduce the export of critical raw materials like iron ore and instead increase the export of highvalue finished goods, the commerce ministry headed by Anand Sharma has quietly doubled its target for iron ore exports to nine million tonnes by 2013-14 from 4.5 million tonnes exported in the fiscal ending March 31, 2011.

According to sources, the government is trying to reduce iron ore exports in view of shortage of the raw material for Indian steel manufacturers. The country's iron ore exports during 2009-10 had touched 6.03 million tonnes. The proposal, which forms part of the commerce ministry's latest strategy for doubling India's exports in the next three years, comes at a time when finance minister Pranab Mukherjee's budget for 2011-12 has introduced a 20 per cent export tax to discourage the export of iron ore. The proposal of South Korean steel maker Posco to set up a steel plant in Orissa along with mining rights has also been cleared by the environment and forest minister Jairam Ramesh with the explicit condition that no iron ore will leave Indian shores.

The move is clearly aimed at ensuring that the country's natural resources are used for manufacturing value-added products, which create jobs and push up the economic growth rate. Demand for steel in the country is increasing at around 10 per cent a year as new infrastructure projects, including highways sea ports and airports, are being taken up to meet the requirements of the fast growing Indian economy. Similarly, the high growth in the real estate, auto and consumer durables sectors also requires more steel. According to steel ministry sources, India has turned a net importer of steel in the last two years.

"The country's steel manufacturers, such as Steel Authority of India Ltd (SAIL) and Tata Steel, are making huge investments to expand their capacities which will generate more employment and lead to further economic development," a senior steel ministry official told Mail Today.

"In such a scenario there has to be sufficient raw material made available to these companies so that they can meet their production targets, earn an adequate return on their investments and add to the overall prosperity of the country," he explained. Interestingly, the commerce ministry's strategy paper shows that the share of engineering goods will go up in the export basket while those of raw materials will come down.

However, when it comes to absolute numbers it projects exports of iron ore shooting up from the 2010-11 level. Steel ministry officials point out that Indian steel makers have to import coking coal to make steel as this raw material is available only in limited quantities in India. The volatility in international prices of coking coal tends to put Indian steel manufacturers at a disadvantage and if India encourages the export of iron ore this would add to problems.

Steel ministry officials are of the view that earlier exports could be justified to some extent as there was no technology available in the country to process 'fines', which is inferior grade iron ore. However, with new processes such as beneficiation, which converts these fines into pellets, there is case for a ban on iron ore exports, an official said.

Courtesy: Mail Today 

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