Secondary issue

Ratan Tata, acting in his capacity as chairman of the Investment Commission, has reportedly written to the Prime Minister, arguing in favour of a ban on the export of iron ore. Tata is also the chairman of Tata Steel, and therefore has a direct business interest in the matter. He may well have disclosed this interest in his letter, which raises questions about a conflict between his public role and private interest. If Tata wanted to write to the government on the subject, it was always open to him to do so as chairman of Tata Steel. This raises larger questions about the need for clear rules "" such as when businessmen with substantial financial interests become members of Parliament. Should their conduct as MPs be constrained by their private interests, or should they be free to act as MPs without any limitations "" which would mean that Vijay Mallya could speak on the policy on liquor imports, Rajeev Chandrashekhar on rail privatisation, Naveen Jindal on iron ore mining rights and Rahul Bajaj on the import tariff that should apply to two-wheelers. At what point would people be able to make out whether any of these or other people is arguing in the public interest or for private gain? Tata, as the doyen of Indian industry, should set the standard.

As for the specific issue of iron ore export, Tata has written just before the presentation of the Union Budget. Till a few years ago, the Tatas themselves were exporting iron ore though they argue that this was more in the nature of balancing lumps and fines. The timing of Tata's letter is important as the government has to decide what to do with the tax it imposed in the last Budget on iron ore export, as a sop to those demanding an outright ban. The impost led to a marginal fall in export volume but realisation has not been affected as global iron ore prices have gone up since then, by as much as 75 per cent. The volume shortfall is not due to the tax but logistics problems facing iron ore exporters.

This underlines the point that banning iron ore exports is right now a secondary issue. Arcelor Mittal and Posco, global leaders in steel, have come forward to invest in steel making in India even without such a ban. Their projects are stuck because of protests over land acquisition and allocation of iron ore mines.

If India were to set its house in order, more investment in steel-making would come, to take advantage of both the iron ore deposits and the country's competitiveness in manufacturing. Nobody will carry a bulky material like iron ore across the seas if efficient manufacturing is possible next door to the mines. That is why Jindal Steel and Power will mostly make steel in Bolivia where they will mine iron ore, while Tata Steel itself will ship out all the iron ore it will mine in Ivory Coast.

There will be more iron ore to go around if the policy for prospecting for it is set right. The minerals policy was supposed to do this, but it has been hanging fire even after the Hoda committee has made its recommendations. The committee has recommended that iron ore mines be auctioned by state governments, but added that a government need not do this if it is to promote manufacturing within the state. If this recommendation is accepted, it will mean restrictions on iron ore shipment across even state boundaries within India. Chattisgarh and Jharkhand, blessed with lots of iron ore but less than adequate administrative expertise, seem unable to handle an issue as sensitive as the allocation of iron ore mines when powerful interests are at play. Tata has raised a secondary issue when a more important one "" setting transparent rules for the sale of mining rights "" remains unresolved.