Union steel minister Virbhadra Singh speaks to Sweta Ranjan of Governance Now
Sweta Ranjan | September 28, 2010
At a time when illegal mining and export of iron ore has become a political hot potato, union steel minister Virbhadra Singh has put his weight behind those favouring a ban on such exports. Singh also has a role to play in dealing with the vexed question of balancing the interests of the mining and steel industry with the constitutionally guaranteed rights of the communities that inhabit the mineral-rich areas.
There is increasingly clamant question of compliance with laws for protecting the environment and forests, as is borne out by the debate over Chiria mines. A new mines and mineral development law is also in the offing.
In this interview with Sweta Ranjan, Singh articulates his stand on illegal mining, conflicts between mining and the rights of the local community, Chiria mines, new draft law for mining, and other issues.
You have called for a complete ban on the iron ore exports. Why?
This is my personal view, which is gradually gaining wider acceptance. Iron ore that we are currently mining and exporting will not last forever. So it makes eminent economic sense to conserve this resource to meet the future requirements of the country. If we must continue with the exports, then we should have a policy to add value to this precious natural resource. Exporting finished goods generate greater wealth for the country than raw materials.
We have also been investing heavily in the steel industry. The public sector has been spending thousands of crores to renovate, modernize, and expand capacity. The private sector too is expanding very fast. At this rate, we will soon require every ounce of iron ore mined in the country for our own production of steel. We have a duty to first make this resource available to the domestic industry.
Currently, even some of the public-sector enterprises like Rashtriya Ispat Nigam (RINL) and Kudremukh Iron Ore Company do not have captive mines. I don’t think any steel producer in the country, except SAIL and Tata Steel, has captive mines. This creates a sort of imbalance as captive mines produce ore at a fraction of the cost at which it is sold in the market. That, in turn, seriously affects the profitability of the companies that have to buy the ore from elsewhere. So we must first create a level playing field within our own country before we go all out for exports.
Also, unless we make exports difficult, we will never be able to encourage beneficiation and pelletization of iron ore without which there is no real value addition.
That might not seem like a very bright idea to the mining lobby, but I feel very strongly about it.
I understand that you have suggested to the prime minister as well as the finance minister either a complete ban on iron ore exports or at least a flat 20 per cent export duty. What has been the response to your proposal?
They are sympathetic about it; they say they are looking into it. When they find it necessary they will do it. I have already said this is not the view of the government. This is my personal view that is now gaining support.
What steps have you taken to stop illegal mining of iron ore?
Unfortunately, that does not fall under the purview of the steel ministry. The mining act is not enforced by the steel ministry. It is primarily the state governments who are responsible for this.
Recently, Karnataka chief minister told the assembly that the year 2009-10 saw 71,27,937 metric tons of iron ore being illegally exported out of the state. Do you have any estimate of illegal mining and trading of iron ore in other states?
It must be a mindboggling figure, but we have not done any calculations. Like I said, it is not really our responsibility. It is for the first time that Karnataka chief minister has come out with such figures. But everybody agrees that illegal mining is taking place in many places and that the ore thus mined is being exported. Nobody denies this, but the volume has never been quantified. Let me reiterate that the steel ministry has no role or legal authority to either grant mining leases or to enforce the mining Act.
Why do you think we are not able to stop illegal mining?
It’s either plain bad governance on the part of the state governments or their complicity -- mostly the latter. Take Karnataka, for instance. You know the case of Reddy brothers. They are the strongest pillars of the present state government. If they withdraw their support, the government will collapse. In such a situation, people who have the ability to do something also have the responsibility to do it. If the state government does nothing about illegal mining, they become responsible for it. And that is not a very good state of affairs.
India has not been able to utilize low grade iron ore fines. Do we lack the technology to use the fines? What do you plan to do to ensure that low grade ore fines are put to some economic use?
Technology exists but it is not yet freely available and fully commercialized. Korean company Posco has developed a new technology called Finex with which ore of lower iron content can be utilized in making steel. This patented technology can reduce coking coal consumption as well as costs. Our delegation went to South Korea and saw their establishment. We have been talking with them and are actively pursuing it. We have also been talking to Kobe Steel; they have a proprietary technology called ITMK III, which is used in making nuggets of steel.
What has been the role of your ministry in clearing the regulatory hurdles in the way of steel plants planned by Arcelor Mittal and Posco in Orissa and Jharkhand?
Unfortunately, the matter has been delayed due to cumbersome rules and procedures. Most of these projects fall in tribal areas which are governed by schedule 5 of the constitution. There are some more procedures to be followed, but now things are picking up. The steel minister only acts as a facilitator so that hurdles are removed and things speed up. Having said that let me also remind you that land acquisition is primarily under the domain of state governments. The steel ministry can only use its good offices to lean on the state governments and it has been doing so. Hopefully we will find a way out.
You have been sounding quite generous in the matter of compensating those affected by mining operations. How do we tackle the issue of compensating and rehabilitating the people affected?
The companies who have offered good compensation on their own may be able to solve their problems. I tell the companies, who want to set up new projects, that they should be generous with the communities who will be affected by their operations. They should compensate those communities with much more than what the law lays down. They should see to it that affected communities are properly resettled and rehabilitated, their children are educated, trained, and are able to get gainful employment. The companies should open polytechnics and training institutes for the displaced so that by the time factories come up these children are also trained and ready for employment. For the displaced to accept industrial and mining projects, they must be included in the process of growth.
You have set up a target of 120 million tons of steel production by 2012. Is that achievable?
It is achievable. There are many brownfield projects in the pipeline in the public sector as well as the private sector. I have not taken into consideration the green field projects of Arcelor Mittal and Posco, each one of which has proposed capacity of 10-12 million tonne. There have also been some delays, but we are hopeful of achieving the target.
Will you be able to meet the target, if the decision on the renewal of the lease for Chiria mines in Jharkhand does not come in favour of SAIL?
We want Chiria mines for future raw material security and for five steel plants under SAIL, which is investing thousands of crores of rupees in expansion and modernization. We are confident that the decision on Chiria mines will be in our favour. Bihar government had leased Chiria mines to IISCO which was merged with SAIL. So naturally we are the logical inheritor of those mines. That has been accepted by the Jharkhand government.
I understand that the ministry of environment and forests (MoEF) has sought to link the clearance for Gua mines in Jharkhand with the Chiria mines, so that if you get the former you may not get the latter. They say Chiria mines fall in a no-go area which is a migratory route for elephants.
I don’t want to answer this. It can’t be debated. There is no harm to the forest. It should be given to SAIL. Chiria mines are not a small area. They are many blocks of mines spread over large tracts of land. It can be scientifically mined with due regard for the environment. We will mine at one place; once done we will regenerate the place and move on to another place.
There are greater chances of environmental degradation, if five companies were to operate in the same area. Giving it to a company like SAIL, which has a very good track record in looking after the mining area properly, will cause no harm to the environment.
I am hopeful that the MoEF will take a rational decision. I am in touch with the PM on the subject. In the name of forests and environment, we can’t compromise the development of the country.
After an argument with the coal ministry, environment minister Jairam Ramesh was recently compelled to expand ‘go-areas’ by 10 per cent. Are you also seeking expansion of go-areas for mining iron ore?
What he is doing is also very important. Wildlife must be preserved. When I became chief minister for the first time, I had put a total ban on felling of trees and killing of animals. But there is also the question of development. They have to strike a balance between the two. We do want more go areas for our long-term requirements, but we don’t want the entire thing at once.
What are you expectations from SAIL’s follow-on public offer (FPO) that is expected to hit the market in October or November?
We hope to raise about Rs 16,000 crore in two tranches. Half of that goes to the government and the other half goes to SAIL for its expansion and modernization.
Do you have any plan to have some control over steel prices? Is there a need for a regulatory body in the steel sector?
Steel price across the world have been volatile. Many countries have not yet recovered from the economic meltdown that happened in 2008. Luckily, India did not face much of it and has grown robustly. Today, the steel industry has no problems as such because of that. Here production has increased and demand, particularly domestic demand, is robust. As far as prices are concerned they are sometimes influenced by the global prices of steel and raw materials like iron ore and coking coal. With just about 11-12% market share between SAIL and RINL, coupled with the fact that steel was deregulated as far back as 1992, we do not have the luxury of setting prices. We can only follow the market.
We have not thought of setting up a regulator. But if prices increase or decrease for no obvious reasons, then naturally we may have to take some remedial measures. I do not, however, see ourselves going back from a free market economy to the one that is regulated.
Two years ago the then finance minister, P Chidambaram, had famously said that the steel industry had been behaving like a cartel.
I don’t think there is cartelization because two or three big companies in the steel sector belong to the state. There is no reason for the government-owned companies to join the private sector and form a cartel.
Chidambaram had suggested then that his department would enquire into the alleged cartelization. Had there been an enquiry?
This is not in my knowledge.
What are your views on the new draft proposed for the mining sector, Mines and Minerals (Development and Regulation) Act, 2010?
We have said that PSUs manufacturers and others should be treated as separate categories. We also want the central government to continue to exercise its role, which is not only a constitutional responsibility but the need of the hour. State governments have traditionally not shown much sagacity in this regard. Thirdly, we believe that just giving 26% equity to the displaced is both impracticable and difficult to monitor and execute.
Why are you opposed to the mines’ ministry’s proposal for 26 percent equity participation of tribals in mining activities? Do you have an alternative proposal?
Mere equity participation is not the answer. The idea is to rehabilitate successfully and gainfully. Greater details need to be worked out in this regard.
You have reportedly favoured a merger of the mining ministry with the steel ministry.
That belongs to the remit of the prime minister. Mines and steel had always been one ministry before they were separated. From the point of view of governance, a re-merger of the two ministries would allow synergies to be tapped and better co-ordination. That should not be misunderstood as an attempt on my part to enlarge my portfolio.
How is India positioned to face the threat from Chinese steel producers?
They are trying to capture the market in India by selling cheap goods, including steel. That is the challenge we have to meet. I am not against legitimate trade, but I am against dumping, which harms the domestic industry. When that happens, we move in. It is a challenge we have thus far met successfully.
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