Mineral Policy Issues in Thecontext of Export and Domestic Use of Iron Ore in India
Total Page:16
File Type:pdf, Size:1020Kb
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Firoz, A. S. Working Paper Mineral Policy Issues in theContext of Export and Domestic Use of Iron Ore in India Working Paper, No. 207 Provided in Cooperation with: Indian Council for Research on International Economic Relations (ICRIER) Suggested Citation: Firoz, A. S. (2008) : Mineral Policy Issues in theContext of Export and Domestic Use of Iron Ore in India, Working Paper, No. 207, Indian Council for Research on International Economic Relations (ICRIER), New Delhi This Version is available at: http://hdl.handle.net/10419/176225 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Working Paper No. 207 Mineral Polic y Issues in the Context of Export and Domestic Use of Iron Ore in India A. S. Firoz Consultant March 2008 INDIAN COUNCIL FOR RESEARCH ON INTERNATIONAL ECONOMIC RELATIONS Contents Foreword ............................................................................................................................. i Abstract .............................................................................................................................. ii Executive Summary ......................................................................................................... iii Introduction ....................................................................................................................... 1 1. Resources and Reserves of Iron Ore in India ............................................................ 3 1.1 Estimates of Reserves and Resources of Iron Ore .................................................. 3 1.2 Technical and Commercial Issues Related to Estimation of Reserves and Resources of Iron Ore ............................................................................................. 4 1.3 Iron Ore in the Global Context .............................................................................. 11 2. Iron Ore Production and Trends of Investment in India ....................................... 13 2.1 Trend and Structure of Production of Iron Ore ..................................................... 13 2.2 Investment in Mining ............................................................................................ 18 3. Domestic Consumption of Iron Ore ......................................................................... 22 3.1 Iron Ore Consumption by User Industries ............................................................ 22 3.2 Iron Ore Consumption by its Form ....................................................................... 23 4. Exports of iron ore ..................................................................................................... 28 4.1 Trends and Structure of Exports of Iron Ore ......................................................... 28 4.2 Issues Regarding Future Exports of Iron Ore ........................................................ 30 5. Forecast of Demand for Iron Ore in India .............................................................. 34 5.1 Short –Period Forecast of Iron Ore Demand in India ........................................... 34 5.2 Long Term Demand for Iron Ore .......................................................................... 37 6. Iron Ore Issues in Steel Industry Perspectives........................................................ 42 6.1 Raw Materials and Costs ....................................................................................... 42 6.2 Agglomeration of Fines ......................................................................................... 45 6.3 Export of Steel ....................................................................................................... 49 7. Policy Issues ................................................................................................................ 51 7.1 Export .................................................................................................................... 51 7.2 On-Homegeneity of Iron Ore and Supply and Demand Mismatch ....................... 55 7.3 Trade, Competition and Efficiency Issues ............................................................ 56 7.4 Agglomeration and Incentives............................................................................... 58 7.5 National Mineral Policy ........................................................................................ 59 7.6 Captive Mining ...................................................................................................... 64 Conclusions ...................................................................................................................... 68 List of Table Table 1: Iron ore resources and production between 1980, 1990, 2000 and 2005 ............. 3 Table 2: Mining Experience in India: Depths Attained ...................................................... 8 Table 3: Global Resources of Iron Ore ............................................................................. 12 Table 4: Iron Ore Production in India ............................................................................... 13 Table 5: Production of Iron Ore by States 2005-06 .......................................................... 13 Table 6: Iron Ore Production by Sectors: Public and Private ........................................... 14 Table 7: Iron Ore Production by Sectors: Captive vs. Non-captive ................................. 14 Table 8: Production of Iron Ore by Grade (2004-05) ....................................................... 15 Table 9: State-Wise Production: Ratio of Lumps, Fines and Concentrates ...................... 16 Table 10: Global Iron Ore Contract Prices ....................................................................... 20 Table 11: Consumption of Iron Ore: 2005-06 - Industry Estimates ................................. 22 Table 12: Export of Iron Ore from India .......................................................................... 28 Table 13: India’s Port-Wise Iron Ore Export ................................................................... 29 Table 14: Production and Exports of Iron Ore by Grades (2004-05) ............................... 30 Table 15: Annual Demand for Iron Ore: Up to 2015-16 .................................................. 35 Table 16 ............................................................................................................................ 35 Table 17 ............................................................................................................................ 35 Table 18 : Cumulative Iron Ore Demand for Future Years Under Different Scenarios ............................................................................................................... 40 Table 19 : Cumulative Iron Ore Demand for Future Years Under Different Scenarios with 100 million tonnes of Exports ...................................................... 41 Table 20 : Global Iron Ore Consumption Forecast (Billion tonnes) ................................ 53 Table 21 : Details of Mining Concession Approved by Ministry of Mines in the last 4 years............................................................................................................. 66 Foreword The global commodities super cycle is not showing any sign of coming to an end in the near future. This is no different for the steel and the raw materials to this industry. Iron ore demand has been increasingly rapidly and the deepening supply constraints have led to phenomenal increases in its price across the globe. India has significant reserves of iron ore and has emerged a major exporter taking advantage of the burgeoning Chinese demand. The high levels of exports attained in the past few years and the possibility of the same growing further have also raised some concerns about the supply constraints hitting the domestic steel industry which is expanding rapidly. This necessitates that a balance be achieved between export and domestic requirements. Whether iron ore should be conserved for the domestic steel industry through active policy intervention, or, whether the market forces be allowed to play freely for optimum allocation of resources between domestic use and exports, has emerged as a major policy issue. At the same time, the government as well as the industry recognize the urgency for reforms in the mineral industry to draw investment and modern technology into it to raise