Iron ore: The mines of dispute

October 8, 2007: The news that the governments of Orissa and Karnataka are reassessing their iron ore reserves, point clearly to the fact that the current estimates of the country's resources may be larger than known so far.

In fact, only bare minimal efforts have led to significant new deposits, and also raised the estimates of reserves in the case of existing mines. Such experiences have been plenty in India as also worldwide. This is good news for steel makers.

Iron ore is perhaps the best bet for the country's steel makers. But, the future of iron ore is not clear-cut. Mining iron ore has not been easy. The country has lost the best opportunity - a time when social conflicts were nothing and infrastructure development could be better planned. No big efforts were made because no one believed iron ore would come to today's position in the market.

Essar and Ispat set up their plants away from the mines and closer to the market place, without really having any captive source to back them up. Global investment did not come in because government policies literally blocked their entry. If one looks at the list of mining leases granted in the past decade, it is all small and mid size players.

Some of them came in and others waited for clearances of several types. Infrastructure to start work was missing. The Indian iron ore industry as a result did not come to its full potential. Today, there is a will to act and money to invest in iron ore, and a lot more money to make from it. But, the fight over resources has also begun. The rush for iron ore resources has also brought in the hard reality that mining and moving iron ore out of the mines will be a much more difficult job, and in certain cases a near impossibility. From local popular resistance to forest laws to legal battles among those who want to own the mines, the iron ore industry will see more roadblocks than expected. This will be more when it will come to large blocks. Ghatkuri of Jharkhand, proposed for Arcelor Mittal is already in the premises of the Supreme Court. Khandadhar in Orissa, proposed for Posco may see similar consequences.

Iron ore rich states are definitely proud of the long queues of those planning to set up large steel plants in their states. There is no hiding the fact that they are there to take advantage of the low cost iron ore, especially if the same is available to them on a captivebasis. In the past few years, new leases have mostly been granted to steel or sponge iron makers on a captive basis. But, these are mostly small mines.

Will the state governments be able to identify large mining blocks for mega steel projects, unless they have to take that away from some government owned companies, or that they are sure of such deposits, knowledge about which has remained outside public domain? Unless there are concerted and sincere efforts to tap new resources and arrive at a more realistic position on it, the supply of iron ore to the industry, or for that matter even for exports, will slow down, marked by intra- and inter-industry conflicts.

Source: The Financial Express