With the current raging debate on whether iron ore exports should be permitted or conserved for national usage, deep fissures have arisen among the government, miners and steel producers.
While, the miners insist the available iron ore resources and estimates ensure availability for a long-time to come, the steel producers are ambivalent on such estimates. Very long-term forecast of iron and steel production and the consequent demand for iron ore made on optimistic assumptions also show that the steel industry can remain comfortable with domestic iron ore supplies even with annual iron ore exports of 100 million tonne (mt) till about 2070 at the current estimates of resources in the country. In the estimates of the working group on Iron and Steel for the 11th Five Year Plan, set up by the Planning Commission, the iron ore demand in the country in total is set to rise to 130 mt by the terminal year of the plan period. Consumption of scrap has been forecast at 18 mt.
In the context of external trade in iron ore, the current policy debate is largely centered around the issue whether there are sufficient iron ore resources in the country to feed the estimated growing demand of the domestic iron and steel industries and also to maintain exports at the current or a ?reasonable? level. Total resources of iron ore in the country has been estimated at a little over 25 billion tonne (bt). This consists of 14.63 bt of haematite ores. Of the total haematite resources, seven bt fall in the category of reserves. Reserves of magnetite ores are only 207 mt with the rest 10.4 bt being classified as remaining resources.
There is no exact or final estimate for iron ore reserves/resources in India. The total resources are bound to improve with increased and better exploratory efforts. The resources and reserves of iron ore have been under-estimated as the methods followed do not provide for an exhaustive estimation of the same.
Geo-physical and geo-chemical mapping done so far in India have not been adequate. It is possible, therefore, that greater exploratory efforts will lead to increase in the total resources as also in the reserves base of iron ore. The reserves and resources of iron ore have been mostly estimated considering a depth of only 50-60 meters or so. In practice, deposits can be found and economically mined even up to 200 meters or more and at current iron ore prices it will surely be economical to mine deeper.
Haematite ores with less than 55% Fe (Iron) have not been included in the category of reserves or resources. Current technology of beneficiation and iron ore prices provide sufficient economic value to process iron ore with much lesser Fe (iron) content. If the same is considered, the estimates of reserves and resources of iron ore will rise further. India exported about 93 mt in 2006-07 and 100 mt in 2007-08. There has been a slowdown in exports of iron ore. The annual growth rate has fallen from 29.1% in 2003-04 to 4.2 % in 2006-07. About 80 % of the ores exported are fines and China accounts for more than 80 % of the total iron ore exports.
However, consolidation within the Chinese industry has meant that demand for iron ore has come down.
The government on June 13 to increase domestic availability imposed a 15% duty on export of iron ore and there is a proposal to hike it further. The iron ore community feels that profitability of the exporters will be sharply hit if the export tax is to be raised.
Such a measure is expected to hit the merchant mining companies in the private sector the most, a segment that has accounted for the bulk of the growth in the industry. Ministry of mines feels such a measure may discourage flow of investment further leading to capacity constraint in the industry. Any stoppage to exports will necessarily mean closure of significant mining capacity as the volumes cannot be diverted to domestic use under any circumstances. Closure of mines would involve naturally expected consequences in terms of loss of economic activities including jobs.
An artificial trade barrier may lead to price distortion, failure to price discovery for prospective investors and subsidisation of an inefficient industry at the cost of an efficient industry.
There is also the possibility that if iron ore exports are restricted or banned and the same is not applied on pellets (considering it as a value added product), there may be a natural movement to pellets production and their exports. This will lead to efficiency loss considering the risk, investment and pricing volatility in the pellets market and continued export of iron ore, although in a different form. Many feel now that the issue of conservation of iron ore for domestic industry may be reviewed, if there is need for it, as recommended by the Hooda Committee after 10 years or so.