Chiria churns

Updated: Nov 27 2006, 05:40am hrs
Who cared about Chiria, the worlds second largest reserve of iron ore, before the Indian steel makers began to think big and the market got really hot Since 1907, Chirias ore has slumbered under the forests of Bihar, with Indian Iron & Steel Co, which had the leases, being a small consumer to begin with and later in no position to invest much. But Chiria is now a magnet, whose projected reserves of 2 billion tonne are enough to make any steel makers blast furnaces rumble with desire. (Indias total reserves of iron ore are around 18 bn tonne.) Players like the Tatas, Jindals and Essar, and Mittal Steel have been attracted to Jharkhand. Even Sail (Steel Authority of India Ltd), having absorbed IISCO, is promising to invest heavily (Rs 1,000 crore) in Chiria.

The story is heating up, with Mittal Steels head of Indian operations reported to have said that the company would not be interested in setting up its promised 12 million-tonne project without Chiria. Jharkhands new government has said, Sail would get priority as a government company. Sail bounced back by promising a new 5 mt project to satisfy Jharkhands desire for value-addition, even as three mines are in dispute. Should Jharkhand favour Sail Or should it side with the Mittals to get the big-ticket investment (Rs 40,000 crore) Both questions deserve a no. The larger issue is that mines are located in backward areas, where development is key. While, ideally, the fate of the mine needs to be delinked from the project, political reality demands a compromise with economic merit in the current situation. So, if captive mines are being allocated, the state would need to use its discretionafter the basic criteria are met, set by global best practices. The way out would be to create competition. Jharkhand could divide up the spoils, if that were legally and physically possible too. So if Sail were to get access to 1bn tonne, it would be enough to feed its new ambitions for a few decades. And Mittal should then be satisfieddoes he own all the ore sources that feed his furnaces Another solution would be to release leases to either party, as and when they bring in the investment.