Gestión de la capacidad

Iron ore remains the most important driving force for the steel industry in India and the steel industry‘s growth so far can largely be attributed to the availability of low cost and high quality iron ore in the country. Large Scale export of iron ore from the country is a matter of concern and is not in the interest of

165 sustainable growth of domestic steel industry. It is recommended that Export of iron ore from the country should be highly discouraged for the following reasons: a) Large scale export of Iron ore will deprive the country the benefits of value

addition and generation of employment in steel sector.

b) Most of the iron ore resources are in the forest and tribal regions. Over- exploitation of mineral resources without commensurate benefits to the domestic economy will have large social and environmental implications. c) Evidence suggests that unbridled export of iron ore during last decade

has led to illegal mining, unethical practices and large scale environmental degradation

d) There exist large potential to increase per capita steel consumption of the country, as the current level of India‘s per capita consumption is way behind not only in comparison to the developed world but also global averages. If India is to build a strong infrastructure, alleviate poverty and achieve economic prosperity, the country will need a strong and a competitive domestic steel industry which will require raw material security for sustained growth.

e) Magnetite resources of the country are predominately found in Western Ghats which is an ecologically sensitive area. If the potential of these resources is to be exploited in a environmentally sustainable manner, the same is possible mainly though underground mining. It is appreciated that underground mining requires huge investment costs and therefore the same will negatively impact the competitiveness of Indian steel industry. f) If large scale export of iron ore is allowed, the domestic steel industry will

have to depend on use of low/lean grade ore, sooner than later. Since cost of beneficiation at present is high and yields are generally low, it will dilute the competitiveness of Indian Steel Industry. However, if exports are moderated, it will push the dependence of steel industry on low grades to a later date by which time, it is expected that research and development (R&D) activities being pursued by the Industry and Government will be able to find cost effective solutions for beneficiating low/lean grade ores.

The objective of value addition and conservation of ore at present is being achieved mainly through increase in export duties. At present the duty on export of all types of iron ore is 20 percent on ad-valorem basis. This coupled with administrative measures taken by the Karnataka Government and that of judicial intervention played a key role in moderating exports.

The situation, therefore, needs to be closely monitored and the export duties may be further increased, if required. Further, in future, fiscal measures may be coupled with administrative measures, if the policy makers are of the opinion that fiscal measures alone are not effective to achieve the objective of conservation and domestic value addition. Further, while a part of pellets produced may be diverted to export markets; the Government needs to ensure that there are no excessive exports of pellets.

166 8.4.3 Additional Strategies to ensure long term Availability of Iron ore for Steel

Industry :

a) It is a matter of satisfaction that ‗Value addition clause‘ for the purpose of ‗Prospecting‘ has been incorporated in the MMDR Bill, 2011. As per the new Bill, the state governments have got the flexibility to frame necessary guidelines. The State Governments, therefore, should provide for an

effective preference for value adders while framing such guidelines/ rules.

b) The MMDR bill, 2011 stipulates that grant of direct mining concessions will be only through competitive bidding. The Working Group feels that there is a need for restricting such bidding to existing/prospective steel producers, value-adders and mining companies having domestic ore linkages. The restriction will ensure domestic value addition and will discourage exports.

c) Some of the new provisions of the MMDR bill, listed below, are in the right direction and may be retained in the MMDR Act to ensure faster and sustainable growth of the mining sector:

 Transferability of reconnaissance, prospecting and mining leases

 ―Extension‖ rather than ―renewal‖ of concession to ensure complete exploitation of mineral deposit

 Special provisions for allowing small deposits in cluster, and making cooperatives eligible for the purpose

 Enhanced penalties for violation of provisions of the Act including illegal mining, empowering Central Government to issue directions and setting up of special courts

 Ensuring sustainable and scientific mining through provision for a Sustainable Development Framework

 Use of funds of District Mineral Foundation for sharing of benefits with local population and creation of local infrastructure

 Setting of National Mining Regulatory Authority for suggesting strategies for increasing investment, revision of royalty rates and launch prosecution in respect of large scale illegal mining

d) Inordinate delay in granting necessary statutory clearances is one of the most important reasons for low investment in the mining sector. It is necessary to evolve a time bound strategy for grant of leases and other statutory clearances required for development of mines.

e) There is an urgent need to augment the existing reserve base of iron ore resources through exploration activities. It is estimated that current reserves of iron ore will not last beyond next 20-25 years if the projected rate of growth in steel industry is to be achieved. Since financial resources of government/public sector companies are limited, greater thrust/investment on exploration activities will have to come through innovative Public Private Partnerships (PPPs) models.

167 f) Techno-Economic feasibility studies of various technologies of underground mining may be undertaken to unlock the potential of magnetite resources in the Western Ghats

g) Imported technologies for beneficiation of ores have limitations to deal with Indian ores as the characteristics of different ores vary widely. It is therefore necessary to develop appropriate beneficiation technologies through Research & Development (R&D) which are cost effective and are successful in dealing with different/specific grades of ore found in India. At the same cost effective technologies are needed to utilize slimes which at present is being dumped by the industry.

h) To optimally utilize the current resources of iron ore, it is suggested that excise duty on beneficiation of low grade ores may be dispensed. Further, the industry may be allowed to import equipments/machinery for beneficiation and pelletisation at zero duty. Since the capital cost of setting up beneficiation & pelletisation is quite high, it is recommended that setting up of such plants may be encouraged through an Interest Subsidy. A scheme for Plan assistance for encouraging beneficiation and pelletisation is placed in the Section on New Schemes in this chapter. 8.4.4 Coal

8.4.4.1 It is a matter of great concern that India has become over dependent on imported coking coal over last few years. The dependence on imports is likely to go up further as the new capacities are expected to come mainly through BF- BOF route. Dependence on import of non-coking coal is also likely to go up to sustain the growth of power sector and other sectors including coal based sponge iron sector. Following initiatives/reforms are required to boost production of coal from domestic sources:

a) The Ministry of Environment & Forests had adopted a policy of ‗Go – No Go‘ areas by which coal mining was completely banned in No Go areas. The move has resulted in stagnation of production of coal. While concerns on environment are justified; it will be necessary to evolve mechanisms through which a suitable balance can be struck between the energy requirements of development and the need for environmental protection. b) At present Coal India Ltd. enjoy monopoly in production and development

of coal assets except in case of coal for captive use. It is being appreciated that stagnation in coal production is largely due to restrictions on investment by private sector. De-regulation of the coal sector, is therefore, the need of the hour to bring in competition, enhance efficiency and improve production performance.

c) The focus of Coal India Ltd. is more on the power grade coal, and the required drive for the development of coking coal assets has been missing in the growth strategy of CIL. To give a greater thrust to development of coking coal assets in the country, it is desirable that the existing coal mines should be demerged from CIL and a separate coking coal company should be formed.

168 d) Diversion of low grade coking coal to power sector should be gradually stopped by increasing the washing/beneficiation capacity in the country in the 12th plan period.

e) Timely Implementation of ‗Jharia Action Plan‘ is crucial for increasing the availability of coking coal and therefore the ‗Jharia Action Plan‘ should be monitored closely by the Government to achieve an early implementation. f) For faster development of captive coking blocks the following policy

initiates are recommended

(i) Single Window System for granting clearances

(ii) Permit coal mining and associated activities through contract mining (iii) Allow companies to sell surplus coal left after captive use

(iv) Provide flexibilities to adjacent block allottees to develop blocks as a single entity

g) Underground coking coal mining has the potential of greatly reducing the disturbance caused to the environment. There has been very little fresh investment in underground mining and there is an urgent need to increase the scope and share of underground coal mining for which participation of the private sector will be a necessity.

8.4.4.2 Despite best possible efforts to enhance indigenous production of coking coal, India may continue to depend heavily on imported coal to meet the requirements of domestic steel industry. It is therefore necessary to develop necessary port and rail capacity to meet the enhanced requirement of imported coal. Considerations of raw material security justify a policy of acquiring coal assets abroad. It may be mentioned that in the oil and gas sector, an institutional mechanism namely ONGC Videsh has already invested $11 billion in oil/gas assets.

Similar investments should be undertaken aggressively in coal sector in the 12th plan by acquisitions in resource rich countries .While an initiative in the form of International Coal Ventures Limited (ICVL) has already been taken, the performance of ICVL so far has been far from satisfactory. A grater thrust and an aggressive policy stance is needed in this area in the 12th plan period. Bi-lateral agreements may play a vital role in enhancing the raw material security of steel industry.

8.4.4.3 In view of a large number of representations received from sponge iron producers about non-fulfillment of commitment made by CIL ; it is recommended that Ministry of Coal may be requested to ensure supply of coal to sponge iron producers as per the provisions of New Coal Distribution Policy (NCDP). Further, it is recommended that pellet plants should be included under NCDP for linkage of non-coking coal.

8.4.5 Natural Gas

8.4.5.1 Natural gas is a preferred input for steel plants for considerations of environmental sustainability. Even then, even the existing demand of gas based DRI producers is not being met through indigenous sources. As per the existing system of allocation of natural gas, Steel sector has been accorded a much

169 lower priority. Switching to imported ‗LNG‘ is an expensive option. Presently, natural gas from the KG basin and other domestic sources is priced at $4.2–5.7 per mmbtu whereas the price of imported LNG ranges from $13‐14 mmbtu. Therefore, steel plants based purely on imported ‗LNG‘ are not viable. The country should take urgent steps for extensive exploration and to enhance the output from existing sources such as KG Basin.

8.4.5.2 Due to reasons of poor availability, low priority to steel sector in allocation and high prices of imported LNG, growth of gas based steel production has stagnated for last several years. Non‐conventional gas resources, particularly shale gas and also coal bed methane (CBM), hold a lot of potential for the steel industry. A major thrust needs to be given to the identification of shale gas resources in India and the determination of the feasibility of exploiting them. Expansion of CBM should also receive priority attention in the 12th Plan.