If the draft mining Bill sought to level the playing field for private and public sector steel-makers by mandating competitive bidding for mining lease, the steel ministry has something directly opposite in its mind: Preferential treatment for state-owned steel-makers like SAIL and RINL.
In an interview with FE, steel minister Virbhadra Singh demanded that long-term iron ore mining leases be allotted to public sector steel-makers on a preferential basis. According to Singh, the government should allocate leases to private steel-makers only after the PSUs? requirements are taken care of. Among PSU steel-makers, SAIL has captive mines but needs more ore since it is expanding operations while RINL does not have any captive mines as on date.
Singh explained the rationale behind his demand: ?PSUs have a special place in the country and they should be given preference in the allocation of iron ore mining leases. In the case of SAIL, the government is spending Rs 80,000 crore for its capacity expansion and the modernisation of plant. Most of this was approved in 2005. The huge investment will be meaningful only if we provide long-term guarantee for raw materials,? Singh said. ?How can one approve the expansion plans investing our own money and leave the raw material part hanging?? the minister questioned.
While demanding preferential treatment on the domestic front, Singh also said that companies like SAIL should go overseas and acquire iron ore mines and coking coal blocks to supplement their raw material needs. ?They should definitely look outside the country also for their supplies,? he said.
The draft mining Bill, which proposes competitive bidding for mining leases, has been vetted by a ministerial panel headed by finance minister Pranab Mukherjee. It requires miners to share 26% of profit with people displaced or affected by mining activities.
The steel minister said that he is not opposed to the 26% profit-sharing concept but a mechanism needs to be worked out by the mines ministry.
?Today, companies like SAIL and Tata Steel have captive iron ore mines. Their steel-making and iron ore mines are one integrated company with a common balance sheet. How would they share the 26% profit from their mines?? Singh asked. Asked if he would agree to a proposal mandating such companies to hive off mining units into a separate entity, Singh said: ?Let them first work out a mechanism… We will form our views then.?
Though SAIL currently meets its ore requirements fully from its captive mines, it would need more as its expansion is completed by 2012-13. Today, the company?s requirement is around 24 million tonne, which would go up to around 35-40 MT by 2012-13.
SAIL is currently developing Rowghat mines for its Bhilai Steel Plant and got renewal for mining lease of Chiria mines in Jharkhand, but not fully. It has, however been given an assurance that the Jharkhand government will renew lease for another 1,000 MT shortly.
According to ministry officials, the government always banks on PSUs for social obligations; so it should protect its interests when it comes to assuring raw material supplies. They point out that SAIL had to step in to save the ailing Indian Iron and Steel Company in 2000; private steel players did bid for the company but only for its land and not the plant. SAIL acquired the company and turned it around.