| Though mining had been opened to private participation in 1993 and 100 per cent FDI was allowed in 2000, the sector failed to attract investors. In the last few years, $830 million was approved, but only $38 million was invested. |
| Regulatory delays and a lack of a clear policy framework never allowed the mining industry to take off. Under the rules, a Reconnaissance Permit holder does not have the right to an automatic Prospecting License (PL). Similarly, a PL holder will have to apply again for a Mining License. |
| However, with the Hoda Committee recommendations likely to be turned into statute, things are set to change. |
| The 24-member Anwarul Hoda Committee was set up in September 2005 by the Prime Minister's Office to encourage investment in mining as well as address the issue of value addition that was absent in past efforts. |
| Most of the Hoda Committee's recommendations have been accepted by the Group of Empowered Ministers and an amendment to the National Mineral Policy will be tabled in the forthcoming Monsoon Session of the Parliament. |
| The thinking in the Government is that these changes will help attract an estimated foreign direct investment of $2 billion (Rs 8,000 crore). |
| The group of ministers, however, did not heed the demand from the steel producers to put a quantitative ban on exports. Earlier, the one-man R K Dang committee had reasoned that exports of iron ore need to be completely banned as they were not adding value. |
| From 30 years of iron ore exports, we have earned $25 billion. We have exported 78 million tonnes of iron ore in 2004-05. If we had exported the steel equivalent of what that ore could produce (about 48 million tonnes) we could have got $25 billion in one year; that is why value addition is needed, reasoned Dang. |
| Mr. Dang's point is well taken. But some back-of-the-envelope calculation could tell you why it will not make a major difference if we allow exports of iron ore, though merit will always remain with his value-addition argument. |
| According to Government estimates, by 2020 Indian steel production is likely to go up to 100 million tonnes. Other estimates put it at 150 million tonnes. Given the rule that one tonne of steel requires 1.6 tonnes of iron ore, the annual need for ore, even if steel production hits the upper band by 2020, would be 240 million tonnes, against reserves of 25 billion tonnes. |
| Even this reserve will grow over a period of time for many reasons. The first is that since 1980, there has been virtually no effort to prospect for new reserves. The second is the change in technology, which will allow faster and better prospecting, which would eventually hike reserves. |
| The extent of role what technology can play is best seen from the Australian example. In 1960, it was estimated that Australian iron ore reserves were 400 million tonnes. Since then Australia has produced around 4,000 million tonnes and the residual reserves have gone up to 40,000 million tonnes now. |
| But what we need to do now is to allow export of only lower ferrous content ore. Currently, around 64 per cent of the iron ore exported is of the better quality, 62 per cent + ferrous content ore. |
| With China beginning to mine even 30 per cent ferrous content ore, there is a huge market up there for even the worst of our ore. If this is accepted as a benchmark, then India's iron ore reserves will be several times more than what they are considered today. |
| The Government has made it amply clear that steel companies that have been in existence in July 2006, will get preference in allotment of the mining rights as compared to newcomers. |
| At present around 22 per cent of the ore produced is for captive consumption. With the new policy, the availability of mines for existing steel companies will dramatically go up. Existing steel companies with mining rights are a good play on the new mining policy that will be tabled in Parliament this August. |
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