The Union law minister Veerappa Moily has waded into the debate on restricting the export of iron ore, but unfortunately on the wrong side. The law minister has demanded changes in the draft Mines and Minerals (Development and Regulation) Bill, 2010, so that the Bill ensures conservation of mineral resources. In particular, the law minister wants a ban on the export of iron ore, in the absence of which he perceives India?s iron ore resources will be completely depleted in the next 20-30 years. This argument in favour of conservation adds another layer to the debate on iron ore exports?the steel minister Virbhadra Singh has, on occasion, favoured raising the export duty on iron ore so that steel manufacturers can add value to it in India before it is sent out. Both sets of arguments are entirely misplaced. They are simply playing into the hands of the domestic steel industry, which wants a form of protectionism imposed in their favour. And protectionism of this kind is bad for the efficiency of the steel industry that needs to compete with the best in terms of technology and productivity, not just policy favours. Iron ore can always be imported from elsewhere and then used to make competitively priced high-quality steel. Plenty of countries in the world already do that.
There are, of course, other arguments against the law minister?s proposal. There is nothing to suggest that India has already discovered all the iron ore it has. Surely, more needs to be discovered. For that, private and foreign investment must be permitted and use of land for mining must be rationalised. The government should focus on transparent methods to facilitate the discovery and excavation of natural resources?like auctions. It can even set royalties at a reasonable rate, to get a fair share of the wealth for the state coffers. But it must not make unnecessary and illogical interventions like the ban the law minister is suggesting. The law minister should also know that the Indian steel industry simply doesn?t have the capacity to absorb all of India?s iron ore. The industry uses mostly lumps and not fines and it is the latter that mostly finds its way to export markets. ?Conserving? what is not being used locally doesn?t make economic sense. The mines ministry must, therefore, resist the law ministry?s suggestions and the Cabinet must come down in favour of the ministry of mines in this important policy matter.