India Intelligence Report

   Steel Projects Suffer as Govt Plans Ore Export


Major steel projects announced largest year with much publicity have reportedly not started because of administrative difficulties and iron ore supply issues while the Government plans to export high quality Iron Ore to China and Japan. Most of the who's who of the Steel Industry, barring Tata Steel, has not ordered any plant and machinery that would produce over 60 million tons of steel.

Most industrial houses such as Posco, Mittal Steel, JSW Steel, and Essar have not started work because of procedural hurdles, local opposition, and haphazard allotment of iron ore mining permission. Mittal Steel has accused the Jharkhand Government with lack of commitment saying that it rescinded an allotment when the Steel Authority of India Limited (SAIL) opposed it. Others say that inadequate pricing by the Government from those who own the land has caused an opposition to the project. There are also lack of adequate rehabilitation and resettlement of those who are ousted from their properties. But Government officials disagree that these steps are inadequate.

The big point here is that while laws and plans exist on paper, enforcement and application of these plans is very lax-- as was discovered during the recent Narmada Dam protests. Besides, there is no independent verification mechanism making it difficult for large employment generating projects like these that would make India a major powerhouse to go forward. The Government should seriously consider creating independent escrow accounts and have an independent privately owned but publicly monitored escrow agency to manage the transfer of monies so people do not have to pay bribes to get their due.

In related news Steel Minister Ram Vilas Paswan revealed that India will enter into a minimum of 5 year agreements with China and Japan to export high quality iron ore. He claimed that Indian steel making capacity has saturated and this calls for an export of precious high-grade iron ore. 

This is trend that the Government should arrest immediately. Exporting raw materials brings in revenue to the country but not as much as processed materials or value-added products. Instead of trying to export iron ore, India should be encouraging these new plants that are stalled for administrative reasons to take off. With those projects operational, India will not have to look for additional steel making capacity to justify the export of raw materials.