Falling rupee a blessing for miners?
CLEOFATO ALMEIDA COUTINHO
The Supreme Court which granted an exparte ban on all mining operations in the state of Goa is yet to take up the case for final hearing But, suddenly there is a glimmer of hope for those (including the government of Goa) who were campaigning to lift the Supreme Court ban, but not due to any regulatory mechanism to protect the environment being in place. Neither the Central nor the state governments have worked out a formula on ‘sustainable’ mining for this tiny state nor a monitoring framework on how the local people would benefit from mining. Further, the falling rupee against the dollar seems to have come to the rescue of the miners.
The current account deficit touched a historical high due to the rising import of gold and petroleum products and a fall in e iron ore exports has only added to the widening gap. The issues raised by the petitioners or the illegalities highlighted by the M B Shah Commission have paled into insignificance due to the Prime Minister pitching for the export of iron ore to breach the current account deficit. The government is desperate to raise foreign exchange and arrest the further fall of the rupee.
That the Central government will play a crucial role before the Supreme Court can be gauged from the public stand of the Union Finance Minister P. Chidambaram and the Union Minister for Commerce and Industry Anand Sharma. The mines ministry is set to move the Supreme Court to seek relaxation in some of its orders on iron ore mining. The commerce minister had confirmed that the Central government would approach the Supreme Court to resolve the impasse as the there is drop in iron ore exports.
The export of iron ore has been consistently coming down from a high of 117.4 million tons in 2009-2010. In 2010-2011 it was 97.66 million tonnes which came down to 18.37 millions tonnes in 2012-2013. The Supreme Court ban in the Goa mining case is one of the major factors in the drop of iron ore exports as Goa was exporting nearly all of its annual output of more than 43 MT. Goa’s contribution to India’s steel Industry is negligible. In October 2012 the Orissa Government took a bold and a progressive step and banned the export of iron ore and ordained that the iron ore mining could be done only for captive use.
Of late the entire debate on iron ore revolves around export of iron ore and the falling rupee. That the domestic steel industry has also suffered due to the shortage of iron ore following the ban in Karnataka is hardly spoken about. Iron ore production has come down from 218 MT in 2008-09 to 140 MT in 2012-13 due to the enforcement of environmental and other regulatory measures
The falling rupees has rattled the Central Government in the election years and the commerce ministry has floated a cabinet note on reducing export duty on iron ore which is currently at 30 per cent and affecting both varieties of ore (lumps and fines). The Mines Minister in fact has publicly committed himself to bringing down the export duty to 20 per cent. The steel ministry and the steel industry are rightly opposed to the proposal of bringing down export duty on iron ore to facilitate exports as any relaxation would put the industry into a severe shortage of iron ore. But the government believes that there is exportable surplus of iron ore that can be used to bring down the current account deficit. In a kneejerk reaction to augment foreign exchange reserves, it has escaped the country’s attention that steel exports have jumped from 1 per cent in 2011-2012 to 14.6 per cent in 2012-2013 and the growth export of finished steel has slowed down to 14.3 per cent in 2012 to 2013 against 32.56 per cent the previous year.
The export duty on iron ore was raised to 30 per cent in December 2011 to ensure the availability of ore to the domestic industry. At this critical juncture, any reduction of the export duty coupled with the current exchange rate will only boost the momentum of exports, depriving the domestic steel industry of the raw material.
As the Central government is considering reduction of export duty to facilitate the increase of exported iron ore, a parliamentary standing committee on coal and steel has suggested the hiking up of export duty on iron ore beyond the existing 30 per cent and even a total ban on exports with a view to conserving the ore for domestic consumption in the future. The committee on coal and steel in a report tabled in the Lok Sabha on September 8, 2013 has recommended that the government should take appropriate measures by further increasing the export duty beyond 30 per cent and also suggested gradual reduction in iron ore exports to ensure that “this scarcely available national asset” is reserved for the growth of the country. In fact the committee has recommended a total ban on the export of iron ore for the purpose of saving India’s steel industry. The standing panel’s report must be given due consideration.
The Steel Authority of India is in the process of enhancing its steel making capacity beyond its current levels and the country’s finance managers in their desperate hurry to augment the foreign exchange reserves must not take any steps in making this country an importer of iron ore. Bartering away exhaustible national wealth for immediate short term gain would not be a step in the right direction. The right direction would be to increase our pelletization capacity and using our national resource for our domestic industry.
