Wednesday, October 18, 2006

should India be supplying iron ore to China?

oct 18th, 2006

absolutely not to china.

everybody wants india to send them raw materials. just like the limeys did, in successfully destroying india's world-leader steel and textile industries: they banned production and export, and successfully turned india into a source of raw materials and a market for their shoddy products.

---------- Forwarded message ----------
From: Girish

http://business-standard.com/common/storypage.php?autono=260536

Should exports of iron ore be banned?
 
Business Standard / New Delhi October 04, 2006

J Mehra, Director,
Essar Steel Ltd

The government will get Rs 55,000 crore of taxes from steel production versus just Rs 352 crore from iron ore exports of an equivalent amount.

Before one gets into a debate on whether India should go on exporting iron ore or not, one needs to understand the elementary difference between the business of exporting the ore and using it at home to produce steel. Unlike many other manufacturing industries, the steel industry has very special dynamics. While the conversion of iron ore into steel generates a fabulous amount of revenue to the local governments, employment and a great degree of value addition, it kick-starts a similar chain in so many downstream industries as well. 
 
Each tonne of exported iron ore from the mines of Bailadilla in Chhattisgarh, Bellary in Karnataka or any other mine, leave behind just Rs 8 to 27 as "royalty" for the respective state government. On the other hand, the state exchequer gets at least Rs. 5,000 as first-step taxes on each tonne of raw steel produced in a local plant. (It takes about 1.6 tonne of iron ore to produce a tonne of steel.) 
 
Even going by the already outdated estimates of the Indian Steel Policy-2020, which aims at producing 110 mn tonnes of steel by 2020, this difference in government income from taxes on steel production will come to Rs 55,000 crore as compared to just about Rs 352 crore through royalty (at an average rate of Rs 20 per tonne) for exporting an equivalent 176 mn tonnes of iron ore required to produce this much steel. In real terms, the steel industry generated Rs 15,500 crore tax revenue and 20 lakh direct and indirect employment as compared to Rs 312 crore of royalty and 1.35 lakh jobs by the entire iron ore mining industry during 2005-06. The Indian steel industry hopes to surpass the expected 2020 levels of production by 2012 itself. 
 
At best, India has ore reserves of 23 bn tonnes. Out of this, over 10 bn tonnes are in the Western Ghats where the Supreme Court has already stopped mining in many areas due to the environmental vulnerability of these zones. A large part of the remaining 13 billion tonne reserves too is under forest cover. Therefore, even with the most liberal policies of exploitation, these reserves are not going to last beyond 30 years, or 35 at the best. 
 
It may be interesting to note that while only a little above 60 mn tonnes of iron ore was used for steel production in India last year, 90 mn tonnes was exported during the same period. Out of this, nearly 80 per cent of exports went to China which has 46 bn tonnes of iron ore reserves and happens to be the most potential rival of India in the world steel market. 
 
The Indian steel industry's only advantage vis-à-vis its international competitors is the high quality of Indian iron ore. This compensates for high costs of energy, coking coal, interest rates and other financial costs. Losing our only advantage by allowing free exports to our own rivals is as good as committing hara-kiri. It is high-time we put a blanket ban on iron ore exports, to preserve India's long-term national interests.
 

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1 comments:

Shahryar said...

So why isn't Tata Steel investing $8.6 billion in India instead of buying up a failing steel producer in the UK?

Excerpt from Corus may accept Tatas' takeover bid on Friday

Corus has a capacity of 18 million tonnes a year, while Tata Steel produces 5 million tonnes a year.

Meanwhile, the British Steel Workers Union sought safeguards on wages and pension for Corus employees. Tata Steel must provide "guarantees on the terms and conditions of employment for Corus' UK employees, particularly on pay and pensions," The Guardian newspaper quoted the union as saying.

A British lawmaker also wrote to British Prime Minister Tony Blair asking the government to initiate talks with Tata Steel to ensure that there were no lay-offs.