Ministry for pact between miners and steelmakers

Even as the government is yet to finalise its stance regarding export of iron ore, the commerce ministry has sought allowing private sector steel producers to enter into direct long-term contracts with miners of iron ore.

This will ensure that only residual iron ore gets exported, while the domestic steel industry, on an aggressive expansion mode, has adequate supplies for steel making.

"We have suggested that steel producers enter into long-term contracts of five to seven years with iron ore producers similar to those in countries like China, Japan and South Korea. These contracts could be given out at concessional rates. We, however, do not favour a ban on exports or regulating export by fixing a quota," a top commerce ministry official said.

"Imposing ban is not a solution. If the private sector is allowed to resolve the demand and supply problem within itself, only the residual iron ore will get exported," he added.

The steel and mining industries are currently engaged in a tug of war over iron ore export. While the former has called for a complete ban on such export, the latter has vehemently opposed the idea.

After the Hooda Committee, set up by the government to suggest ways to attract foreign investment in the mining sector, submitted its recommendations to the government, the steel lobby wrote to the Prime Minister's Office that iron ore exports should be banned as it was a finite resource.

The committee had sought levying of a duty on the export of iron ore with ferrous content of over 65 per cent.

The PMO then set up an inter-ministerial panel consisting of officials from the commerce ministry, the steel ministry, the mines ministry, the department of industrial policy and promotion, and the Planning Commission, chaired by the mines secretary.

The panel is expected to submit its recommendations shortly, after which the government will take a final call on iron ore export and bring about necessary amendments in the Mines and Minerals (Development and Regulation) Act, 1957, in the winter session of Parliament.

Of the 165 million tonnes of iron ore that was mined in 2005-06, almost 90 million tonnes found its way into the export market, mostly headed to China, while the remaining 75 million tonnes was domestically consumed.

Fuelled by China's galloping demand, export of iron ore has been steadily growing, which in 2000-01 stood at just 37.49 million tonnes.

China produced 126.3 million tonnes of steel in 2000, which vaulted to 349.1 million tonnes last year, and is expected to cross the 400-million-tonne mark this year.