The country?s mining sector is passing through one of its worst challenges. Lack of a national mining policy has been further complicated by the recent ban on mining of iron ore in the Bellary region of Karnataka, thereby creating a temporary hiccup in the domestic steel supply. The sector has clocked a marginal growth rate of 0.6% in June and only 1% growth during Q1 of FY12 against an eight-time high growth rate achieved in the corresponding period of last year.
As coal and iron ore are the predominant members of the sector, low technology in mining operations, handling equipment and non-availability of skilled personnel have all combined to make the sector a happy hunting ground for unscrupulous mafia who thrive on the unholy nexus among government officials, police and politicians.
The southbound journey of the sector was also hastened by the activities of steel industry, which had not bothered to upgrade the beneficiation, pelletisation technologies and allowed the massive reservoir of fines to accumulate and create environmental problems. Environment and forest clearance for fresh mines, particularly those under hilly and tribal areas, would continue to remain vexed. In case the mining Bill scrapes through the current monsoon session, it would usher in fresh bouts of investment from the prospective miners.
The mining sector, therefore, has a good potential to grow, provided the policy hindrances are resolved and the industry puts in money for newer technology and skill development in the post policy issuance phase.
Thermal power projects also are heavily dependent on coal linkages which are again constrained by inadequate rail and road network. Talking of power sector, it is observed that electricity generation has clocked an 8.2% growth in the first quarter of the current fiscal over 5.4% growth in the previous year.
Expectedly, the manufacturing of electrical equipment has achieved a growth of more than 24% in the same period. As a result, the imports of cold- rolled grain oriented sheets, which are not available from domestic sources, have observed substantial rise in the recent period.
Though capital goods sector has grown by around 17% in Q1, the machinery manufacturing and equipment sector has witnessed a negative growth of 1.6% in the current period.
The orders for machinery and equipment emanate from investment in new projects which is showing a subdued progress. Combining all these factors, steel consumption, no wonder, has grown by only 0.7% in the first four months of the current year compared to the last year.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal.