New mining policy removes state curbs

The new mineral policy (NMP), cleared by the Union cabinet last week, has removed the pre-requisite of value addition within the state for companies applying for an iron-ore mining lease.

The move will benefit those steel companies that purchase raw material from the open market.

"The Cabinet note on the NMP stated that the country is a single economic region and therefore any company cannot be denied a mining lease by a state government only because it proposes to set up a plant outside that particular state," said steel industry sources.

While this could be a positive development for the steel industry, steel producers are uncertain about the working of this aspect of the policy.

"How will allotment of iron-ore mines take place? Why will an iron-ore rich state make recommendations for a company that plans to export raw material to another state for value addition?" they said.

Currently, recommendation for grant of a mining lease has to come from the state government. The cabinet note also spelt a preference for value addition while allotting an iron-ore mine and allows standalone mining only in a case where there is no application for value addition.

"In the last seven years, of the 15 new mining leases granted by the states, 12 have gone to the merchant miners while we buy iron ore from open market. The preference to value adders should help us," they added.

Most new steel capacities announced by the likes of Arcelor Mittal and Posco, among others have not made significant progress owing to several reasons and lack of a secured iron-ore supply is one of the main impediments.

This will also benefit existing companies like Essar Steel and Ispat Industries,among others who do not have a captive iron ore mine.