FE Editorial : Steeling themselves

Written by The Financial Express | Updated: Sep 30 2011, 08:03am hrs
On the face of things, Karnatakas government cant do much to help the states steel industry which continues to reel under the impact of the Supreme Court ban on iron-ore mining. After the Court found that the government was doing precious little to stop illegal mining or the huge environment damage this was causing, it appointed a monitoring committee and also imposed a ban on mining. Later, as the committees reports came in and the steel industry kept petitioning it, the Court came up with a temporary solution. Let the government-owned NMDC mine 1mn tonnes a month, the Court said, and another 1.5mn tonnes were to be made available each month through an auction from the 25mn tonnes or thereabouts of unsold stocks available at the time of the ban. While industry needs around 2.8mn tonnes a month, this was a good compromise and allowed a period of 16 months or so to find a permanent solution.

Problem is, however, that NMDC hasnt been able to produce more than 0.5-0.6mn tonnes a month. Thanks to this, as well as very small amounts being auctioned, the auction price shot up and industry bought very little oreuntil a couple of days ago, industry got just about 30,000 tonnes of ore as against the 1.2mn tonnes it was expecting to get.

It is not possible to endorse the steel industrys point that auctions be banned and iron ore be sold on the basis of the existing long-run contractsin a shortage situation, as weve learnt from the A Raja case, allowing benefits to be cornered by a few is unacceptable. But there is a case for allowing more mining. The Supreme Courts monitoring committee, for instance, had identified 13 mines other than NMDCs where no irregularities were detectedthese can produce 8-9mn tonnes a year; there are another 18 abandoned/non-working mines that the committee said were clean and according to industry they may yield another 4-5mn tonnes. Both the Karnataka government as well as the Centre need to prevail on the Court to free up mining wherever possible at the earliest. A larger issue, weve pointed out earlier (http://www.financialexpress.com/news/FE-Editorial-From-no-go-to-go/849795/) using the example of Australia, is that allowing professional mining firms can dramatically raise the discovery of ore as well.