India throws $15-bn lifeline to world iron ore miners

Nov 30 2012, 03:32 IST
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SummaryThe government’s efforts to clamp down on illegal mining have handed a $15-billion lifeline to global iron ore giants, and there could be more to come.


Orissa’s state government has fined several mining companies nearly 680 billion rupees for excessive mining of iron ore over the past 10 years, state Steel and Mines Secretary Rajesh Verma said.

None of those fined has been paid up so far, said Verma.

Tata Steel Ltd (TISC.NS) and Aditya Birla Group-owned Essel Mining dispute the allegations.

A major difference from Goa and Karnataka is that Odisha's ore is high grade and intended for the domestic steel industry rather than export.

If mining in Odisha is stopped, Indian steelmakers may need to import 30 million tonnes of high-grade ore a year, said CRU's Aggarwal, adding that overall exports could fall to as low as 5 million tonnes.

India's federal government maintains the way to crack down on illegal mining is through better enforcement of existing laws, higher export duties and improved tracking of transport.

The mines ministry has rejected a recommendation by the Shah Commission for a blanket ban on exports.

The government instead decided to impose a 30 percent duty on all iron ore exports despite opposition from the mines ministry. It could raise this further or hike rail freight rates, where it already charges a much higher rate for ore intended for export.

The wrangling is not just within the federal government.

In Karnataka, the opposition-run state government banned shipments in 2010 in response to pressure from the federal government over illegal mining. Then its chief minister, B.S. Yediyurappa, resigned after being implicated in a $3.6 billion illegal mining scam.

State measures have otherwise been motivated by a range of concerns from damage to the environment by unregulated mining to loss of state revenues from illegal movements of the ore.

"The total learning from this is to abide by the law," said Faisal Shareef, managing partner with Nadeem Minerals, whose mine in Karnataka will restart later this week but will only be allowed to produce about a fifth of pre-ban volumes.

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