In what seems to reflect his ministry?s disapproval of a key omission in the Mines and Minerals (Development and Regulation) Bill it is now vetting, law minister Veerappa Moily has denounced the profligacy of iron ore exports and proposed strict and deterrent penalty if such exports are made at the expense of domestic steel units.
In an interview with FE, Moily also hinted at his preference for an autonomous pan-India regulatory agency backed by statute for natural resources including minerals, pitting himself against the mines ministry?s view ? as in the MMDR Bill ? that states be given full freedom to award mining-related contracts.
? The (MMDR) Bill is lying with us, and it will be ready very soon. In the matter of mining iron ore, we should observe the example of China, which imports large quantities and produces more steel. We, on the other hand, export our iron ore, even at the expense of domestic steel units. I am in favour of a strict penalty in cases where iron ore has been exported, ignoring domestic steel units. Value-addition is the way to go.?
?The Supreme Court verdict on KG-D6 gas made its clear that natural resources are a national property under sovereign ownership. Therefore, I don?t see any conflict between Centre and the state governments, with this kind of a central regulator,? Moily said.
When asked if a new set of legislative initiatives by the Centre in taxation would alter the Constitutional division between the Centre and states in favour of the former, Moily said that when unions of independent nations like the EU were going for economic integration for mutual benefit, it hardly made sense to resist such moves in India. He asserted that these new laws would not have an effect on the federal structure of the country, and quoted the example of Value Added Tax being implemented through the empowered group of finance ministers being beneficial to all states. ?Integration of economic activities is important and it is in this context that the role of regulators becomes important, to accord a comprehensive structure,? he said.
The law minister obviously agrees with his counterpart in the steel ministry Virbhadra Singh on both the need for discouraging iron ore exports and on regulating award of mining rights. Singh is pitching hard for raising export duty on iron ore lumps and fines to a uniform 20% from 15% (lumps) and 5% (fines) now. The steel ministry feels that as matter of national policy, there ought to be extreme stinginess with regard to export of major minerals and the law should back such policy. For a country on a high-growth trajectory, foreign trade in key minerals cannot be left to be managed through the ad hoc foreign trade policy, the ministry reckons.
When contacted, steel secretary Atul Chaturvedi told FE: ?It would be anarchic to give states all powers for award of mining rights.? The steel ministry has already conveyed this view to the law ministry, he said. The Centre ought to be overseeing and controlling exploration, production and consumption of key mineral resources like iron ore and bauxite, the official said. The states should be only executing agencies when it comes to award of mining rights, as in the case of coal, Chaturvedi said.
At present, individual states award mining rights ? reconnaissance permits, prospecting licences and mining leases ? with the Centre’s prior consent. (The Constitution says these awards have to given ?in consultation with? the states but in practice, states give them out with the Centre’s consent). The MMDR Bill seeks to amplify states’ powers on mining rights.
The Centre is virtually a mute spectator when mineral-rich states sit for years on applications for new mining leases or renewal of existing ones. The complex regulatory system involving state administrations also puts large industrial projects on the east coast on hold, causing cost overruns.
Unabated iron ore exports and states’ freedom to issue awards to individuals have been leading to rampant illegal mining, Chaturvedi said, adding that non-renewable raw materials like ore should be conserved for future, and the first claim over them should be for domestic value addition.
China continues to be a ravenous consumer of the world’s iron ore, with 48% of the sea-borne trade in the commodity being China-bound. This is despite the fact that Beijing’s per capita steel usage is 135 kg as against India?s 45 kg and there is an estimated surplus of 300 million tonne in global steel capacity. Analysts wonder if China intends to fuel the global raw material prices and acquire global natural resources as part of a wider strategy, rather than building its own industries.