India Intelligence Report

   India will see Iron Ore Shortage in Near Future

  • High power committee by Planning Commission says that India will run short of iron ore in 25 years
  • Does not propose a ban on exports but calls for an export duty
  • Industry says that this means that nation will get Rs. 40 for 1.6 tons of ore versus Rs. 5000 plus jobs for many

A high level committee set up by the Planning Commission has warned that at “the current rate of growth of 20% of iron ore production, India’s Hematite reserves will last for only 25 years” which will cause India’s steel industry its competitive advantage. The availability of 11.43 billion tons of high quality ore compensates high energy, coking coal, interest rates, and financial costs in India and the only advantage Indian steel makers have over foreign competitors who are usually better financed, technology-driven, and supported by a cohesive economic plan.

Faced by intense lobbying by domestic steel industries, the Government encouraged the Anwarul Hoda Committee to recommend an iron ore usage policy. The committee did not recommend a ban on iron ore export. Strangely, it recommended an “export duty” on iron ore while demanding the discontinuation of “canalization and export licensing” regime. What this proposal means is that, the Government will earn Rs. 40 per 1.6 ton of iron ore exported versus Rs. 5000 from excise duty if the same quantity is converted. Besides, domestic value addition of iron ore will also employ thousands of people and spread the wealth even more.

While it is tempting to export the iron ore for quick money and to balance trade with China, the Government needs to look at the bigger picture. Global growth requires larger quantities of steel which will only push up prices of iron ore and consequently steel. However, with a global shortage of quality ore, the nation’s steel makers would have to import iron ore to produce steel which could aggravate the trade imbalance. Therefore, instead of converting an advantage into a disadvantage for quick gains, the nation needs to play for the long run to export higher revenue earning steel than raw materials.

India’s target steel production is an ambitious 110 million tons by 2020.

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