Domestic steel and sponge industry is not able to obtain raw materials; export of low grade iron fines from Goa cannot take place until legal issues are resolved while the little shipments of pellets now cannot be exported due to additional duty

Indian iron ore exports, prior to the mining ban, due to illegal mining activities in both Goa and Karnataka, was valued $7 billion. Subsequently, the ban in Karnataka was lifted. The Supreme Court had appointed an expert committee, consisting of ecologist CR Babu, geologist SC Dhiman, mineralogist BK Mishra, forest officer S Parameshwarappa and Goa Secretary Parimal Rai to study the matter and submit their report. The panel, headed by retired judge MV Shah to set a limit on the production of iron ore in Goa, is expected to submit its report by 15^th March.
 

It appears that the Committee has opined that only 20 million tonnes of metal ore should be mined in Goa, as against opinion expressed from stake holders. According to demand made by stake holders a more realistic figure (metal ore mining) should be between 45 and 50 million tonnes.
 

It may be recalled that, Moneylife has carried a full coverage on this iron ore issues recently, and readers are aware that work in Goa, as such, in the mining industry has come to a stand still. Manohar Parikkar, Goa's chief minister, while awaiting the final decision on the matter, does not plan to permit mining in the State till the panel's findings are "adequately dealt with". Final report of Shah panel has not yet been tabled in Parliament.
 

During April 2013 to February 2014), iron ore exports from India have fallen to 12.5 million tonnes, due to continuation of export duty. And, according to Rajiv Kher, Commerce Secretary, it is very unlikely that the export target of $325 billion will be reached during the current fiscal, and "it is doubtful, if we can manage to reach $315 billion". Many exporters have blamed the poor export performance due to blocking of duty reimbursement payment by the Finance Ministry for the last four months.
 

Echoing this, it is reported that Anupam Shah, chairman of Engineering Export Promotion Council has pointed out that cash crunch due to pending duty drawback worth over Rs10,000 crore have also affected the exports. In case of iron ore, as mentioned earlier, China and Japan were the principal importers of fine low grade ores from Goa, which, particularly China managed to adopt a technique of blending with both Brazilian and Australian ores to use in the steel industry. Chinese economic slow down has resulted in lower off take, and, it is reported that they have as much as 105 million tonnes of iron ores lying in the port! The market feeling was that there is "over supply in the very near term and may prompt further drop in ore prices"; ore with 62% content delivered to Tinjin has fallen down to a price level of $ 104.70, the lowest in the last four years!
 

Our iron ore exports, from Goa alone, had reached a staggering $5.8 billion (about Rs34,940 crore) and the entire industry in that state is in doldrums. In the meantime, the domestic steel industry has also been facing various troubles, particularly from the supply front. Indian steel makers have been showing a marked preference to use lumps, rather than the low grade fines, and these were consumed by the recently established pellet industry on a large scale, involving, a reported investment of Rs35,000 crore. The recent decision by the government to slap a 5% export duty on them has also affected the export.
 

These beneficiation and pelletization plants, employing over 80,000 people, directly and indirectly, and paying an excise duty of 12% on the production has also come to a standstill. Many of these plants are now practically shut down and miners like NMDC cannot overnight increase their ore production. In other words, the domestic steel and sponge industry are not able to obtain their raw material needs; export of low grade iron fines from Goa cannot take place until legal issues are resolved; the main buyers are slowing down their purchase due to general economic slow down, but at the same time, also anticipating lower prices to be obtained in the months ahead, while the little shipments of pellets now cannot go for export due to export duty being slapped on them.

What a fine mess to be in! It is sad to assume that the international iron ore situation did not make much of dent in the concerned ministries! We do hope that the Supreme Court would consider the plight of the industry and at least give a conditional revival for mining to commence again in Goa, as this will enable miners to re-employ the workers and plan their marketing campaigns.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)