MAC: Mines and Communities

Vedanta increases its iron grip

Published by MAC on 2007-05-03

Vedanta increases its iron grip

3rd May 2007

Last week the Indian goverment announced that it would cut the duty on iron ore exports, imposed in February, so that even more of it can be exported - especially to China which had earlier kicked up a protest about the new rates.

Is it purely a coincidence that Vedanta took over Sesa Goa (India's biggest iron ore exporter) just over a week ago, and that its old friend (and former Vedanta director) finance minister P D Chidambaram was the one to make the concession?

The earlier rationale for imposing higher duties was to ensure that India's iron ore reserves weren't plundered even further without bringing benefit to the country. And now that's gone out of the window.

Meanwhile, an article in India's largest circulation environmental magazine, Down to Earth, describes the devastation which the "iron rush" is already having in Goa - and which will now inevitably increase.

What China is doing to Goa

Sunita Narain, Down to Earth (Delhi)

30th April 2007

I wrote last fortnight about how mining in Goa for iron ore was ripping its forests and devastating its people. I wrote of the violence and protests I saw in its villages, where miners were pitted against people angry at the loss of their cultivable lands and their water bodies. I had asked then: what are we doing? I ask this again.

The fact is that Chinese demand for iron ore has increased its price from us $14 per tonne to us $60. This has spurred a black gold rush-mining as companies are bidding for areas that were either closed or not opened because they were unprofitable or unviable. In many cases, these mines had not been worked because they were close to villages and companies knew that people would probably protest. Now none of this matters. The industry says this is boom time - the Chinese are willing to buy low-grade ore, which Goa has aplenty. The Chinese want this ore, as they will blend it with better quality ore. And their appetite is massive.

Goan industrialists are not asking questions. They are desperate for windfall profits. In January 2007, China imported roughly 36 million tonnes of iron ore, of which India supplied nearly 7 million tonnes. But more importantly, India's exports to China were up 18 per cent - with Goa at the head of the supply line. In the past six years, Goa's mineral exports have increased 35 per cent to 23 million tonnes last year.

But what is clear is that this Chinese connection is costing Goa big time.

While mining companies are making record profits, as evident from their stock prices or balance sheets, the villagers in whose backyards the mines are being dug are devastated. According to official estimates, roughly 430 leases for mines have been granted in the state. History is important as most of these were concessions granted by the Portuguese and were converted into leases by independent India. But importantly, in 1998, only 99 leases were being worked. Now with the black rush, the leases, which were dormant, furiously opened and worked.

It is important to understand what this means for villages. If all the leases are worked, then over 8.5 per cent of Goa's land area would be under mines. Surely, industry argues, that is a small price to pay. But this is an erroneous calculation. The fact is that mining is concentrated in some villages - their entire land will be swallowed up by mines. An application filed under the Right to Information Act reveals that in these villages large areas have been listed as leases - in Colomba village, for instance, almost 1,500 ha of land may be mined, out of the village's 1,900 odd ha.

This is the case in village after village, where, as I wrote last fortnight, I saw land and livelihoods being destroyed. And I saw angry people and tense miners.

The boom has other costs as well. These minerals are moved across the state in barges and in trucks, over village roads and rivers. Here also people lose, and the environment suffers. In Rivona village I visited, people had blocked miner's trucks. They were furious because the truck moved through their village road, leading to pollution and congestion. The children could not cross the local road anymore, villagers said. The red dust the vehicles threw up covered their fields, they added. Roughly 33 million tonnes of minerals transited through the state last year-as Karnataka also sends its minerals through this state. That would mean that 3.3 million trips were made-over 7,000 trucks each day travelled on the roads meant for people. Just imagine what this will do to people's daily lives.

But why are we cribbing, you may ask? Surely, the regulatory processes - environment impact assessments and the mandatory forest clearances should take care of these concerns. The problem is that while public hearings - to listen to local people - are mandatory under rules, actually heeding what people say is not. Therefore, even when people have rejected mines in public hearings, the Union ministry of environment and forests in Delhi has cleared them.

Then, in Goa, large areas of forests are not classified in government records. These are private forests or community lands, so forest clearance is not necessary to cut them down. So what if local watersheds disappear, taking with them the sources of water for villagers?

Industry has its own ways of 'persuading' local people. Everywhere I went, I heard tales of corruption and nepotism. The best tool seemed to be for local leaders - often panchayat [collection of villages] heads - to first take people's concern to the miners and then use this opposition to get lucrative contracts. The best going deal is in transportation. In all this, the local politician has been reduced to nothing more than a middleman - a pimp for the miners to milk.

It is clear that the stakes are high. Today, even if we assume prices of iron ore at us $50 per tonne, mining companies in Goa would have made a neat US $1.15 billion last year - roughly Rs 5,175 crore. All the miners pay to the state is royalty, calculated on each tonne mined. Even if we assume the highest rate of royalty, the state government would have earned us $5 million - Rs 24 crore or just peanuts if we compare to the loot that private companies are raking in. Clearly, there is no public benefit in this business. Only costs.

But this cannot go on. This development is piggy-backing the poor and their environment. People will not take it. I believe Goa will have to decide. It can sell itself cheap on the Chinese market. Or it can restrain its mining to certain areas, make profits and share the benefits with its people. This is a make or break situation. Let us be clear about it.

Govt cuts export duty on low grade iron ores

By Biman Mukherji

3rd May 2007

NEW DELHI (Reuters) - The government on Thursday slashed the export duty on low-grade iron ore to 50 rupees per tonne from 300 rupees after protests by the domestic ore industry, which had seen sales to the key Chinese market tumble.

The duty was imposed in February's Union budget to preserve ore reserves for the domestic steel industry.

"After extensive consultation with all stakeholders, I propose to reduce the export duty on iron ore fines with iron content below 62 percent to 50 rupees per tonne," Finance Minister Palaniappan Chidambaram told members of parliament.

Announcing some revisions to the 2007/08 budget, he said duty on higher grades would remain at 300 rupees per tonne.

One trade official said any benefit would be partially offset by a strengthening rupee, which is near nine-year highs at just over 41 rupees per dollar.

The finance minister also reduced customs duty on nickel to 2 percent from 5 percent, to ease problems facing stainless steel makers amid a surge in global raw material prices.

Iron ore exporters had protested the duty imposition, saying hardly any domestic steel makers were able to use low-grade iron ore fines, which make up nearly 80 percent of India's exports.

Fines must be made into pellets before being used in blast furnaces.

India exported 90 million tonnes of iron ore in the financial year which ended in March, a majority to China.

But Chinese firms cut purchases from India to a trickle after the tax was imposed, and shifted their focus to relatively cheaper Brazil and Australia.

Small shipments were still heading to China as port congestion in Australia -- which has pushed up world prices by $8 to $65 a tonne for medium-grade ore -- affected supplies.

"The reduction in export duty would help exports of low-grade iron ore to some extent, but the strengthening rupee against the dollar would cut back the benefit," said Rahul Baldota of the Federation of Indian Mineral Industries.

Yechury demands ban on export of iron ore

Staff Correspondent , The Hindu

19th December 2007

* At present rate, iron ore deposits likely to exhaust by 2029

* Import of steel causes concern to Yechury

BELLARY: Sitaram Yechury, MP and Polit Bureau member of Communist Party of India (Marxist), has emphasised the need for a new mineral policy that would prevent draining of exhaustible natural resources, particularly iron ore, giving a boost to utilise the resources domestically and export only the end product.

Mr. Yechury was delivering a keynote address on mineral policy, organised at Gandhi Bhavan on Sunday by the district unit of CITU as a pre-cursor to its 12th national conference.

The MP underlined the need to ban export of iron ore. The new policy on mining should ensure value addition to the resources available in the country, generate jobs and aid development of the nation.

He said nothing of the sort was happening while the natural resources were being drained without much benefit flowing to the people.

He expressed concern over the high rate of exports of iron ore.

Iron ore deposits in the country were less than 24 billion tonnes while the exports had gone up by 300 per cent per annum since 2000.

At this rate, all iron ore deposits in the country would be exhausted by 2029, he said.

According to him, the country's iron ore export was around 25 per cent and of this, Karnataka's share was around 36 per cent. B.N.Singh, Joint Managing Director and CEO of JSW Steel Ltd.; and Srinivas Rao, president of Bellary District Sponge Iron Manufacturers' Association, spoke.

T.G. Vittal of Insurance Employees' Association presided over the programe.

Vinod Nowal, Executive Director of JSW Steel; and S. Prasannakumar and Gurushant, secretaries of State CPI (M), were present.


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