Recent events in the industry front once again prove beyond doubt that ?invisible hand? of the market forces has a long way to play its effective role but for the appropriate policy prescription by the government and its steady implementation.
A number of sponge iron manufacturers have been starved of the contracted volume of iron ore availability by Orissa government as it would be converted outside the state.
Karnataka government is permitting exports of iron ore with transparent mode of reporting and emphasis on rail movement for environment consideration.
Natural gas allotment would prioritise fertiliser and power and gas based DRI would bear the heat. The combined effect of all these is rising prices of raw material restricted supply and further squeezing of the margins of steel producers and this would adversely affect the prospective investment in the sector for capacity creation.
The issues that have now surfaced are not new and have been troubling the state and the centre for quite a number of years.
But the overlapping of the policy guidelines has only complicated the aspect of jurisdiction of the state and the centre and most unfortunately political considerations have further vitiated the issues.
Domestic prices of iron ore have reached nearly 8-9 times of the cost of operation with an emerging artificial shortage scenario.
All this is happening in the face of a declining trend in cfr prices of Indian iron ore export to China which are just waiting for a boost in demand from that country.
No special thrusts inside the country are yet visible on setting up beneficiation and pelletisation facilities other than the proposed investment by SAIL and a few other majors so as to minimise the necessity of exports of raw materials.
The urgent need to utilise fines and low grade ore including magnetite iron ore by the domestic steel industry can hardly be over-emphasised. Like in petroleum sector, a small cess imposed on iron ore prices (within the current level) may help creating a fund for setting up these facilities where the state government can also be a partner.
Those paying the cess would be able to utilise these facilities on a priority basis.
NMDC, a successful cash rich company, can come forward in this venture which would ultimately enhance domestic resources and lead to higher steel production in the country. If Pilbara region of Australia can attract fresh investment from Vale and Rio Tinto, why can?t Orissa and Karnataka?
The author is DG, Institute of Steel Growth and Development. Views are personal