REQUIREMENTS OF RAW MATERIALS FOR
STEEL INDUSTRY ─ REFLECTIONS ON
MMDR BILL 2011
R.K. SHARMA
Secretary General
Federation of Indian Mineral Industries
I ─ IRON ORE
The 12th Five Year Plan has estimated the requirements of iron ore based on
projected steel production as under :
Table-1
Estimation of Demand for Iron Ore during 12th Five Year Plan Period
(Qty. : million tonnes)
Crude Steel
Production
Pig iron Production
Total Iron Ore
Requirement
2011-12
73.7
2012-13
85.9
2013-14
94.5
2014-15
104.0
2015-16
114.5
2016-17
125.9
6.1
115.0
6.9
135.7
7.7
149.4
8.5
166.7
9.4
185.2
10.0
206.2
Note: The estimates are based on the technology mix in steel production, standard Input-output norms and transit and
handling losses of raw materials in the process.
Source: Estimated on the basis of projections of crude steel and pig iron production during 12th Plan.
I am not able to understand how the estimation of iron ore requirements has been made. The
requirement will increase from 115 million tonnes in 2011-12 to 206.2 million tonnes in 201617. The note under the above table extracted from 12th Five Year Plan document emphasizes
that “the estimates are based on the assumed technology mix in steel production, standard
input-output norms and transit and handling losses of raw materials in the process”. 30-32%
of the crude steel production is contributed by induction furnace (IF) units which do not require
iron ore. Similarly, the requirements of sponge iron units, which basically use lumps, have
not been indicated.
As against the above projections, the production of iron ore over last five
years has been as under :
Table-2
Production of Iron ore
(Qty. : million tonnes)
A-Mine head Production
Lumps Fines including Total
concentrates
88.31
99.39
187.70
(47)
(53)
(100)
97.85
115.40
213.25
(45)
(55)
(100)
92.40
120.56
212.96
(44)
(56)
(100)
90.26
128.29
218.55
(41)
(59)
(100)
82.16
125.84
208
(39)
(61)
(100)
Note: Figures in parenthesis show percentage in total
Source: Indian Bureau of Mines, Nagpur
Year
2006-07
2007-08
2008-09
2009-10
2010-11
B-Final Product
Lumps
Fines
Total
56.31
(30)
63.98
(30)
63.89
(30)
65.56
(30)
82.40
(30)
131.39
(70)
149.27
(70)
149.07
(70)
152.90
(70)
145.60
(70)
187.70
(100)
213.25
(100)
212.96
(100)
218.55
(100)
208.00
(100)
● The above table brings out clearly the phenomenon occurring worldwide that as we go deep down for mining, the generation of fines is
more. In India also, the production of lumps is gradually going down
and that of fines going up.
Big boulders and lumps are further
crushed in the size of 6-18 mm for sponge iron plants and 10-40 mm
for steel plants. On an all-India basis, roughly 70-72% becomes
fines and the rest 28-30% as lumps. For convenience sake, I have
assumed the same proportion of lumps and fines (30:70) for all the
five years as will be seen in Section B of the Table-2, although the
proportion of fines might be more.
● This therefore emphasizes the need to encourage technologies that
predominantly or wholly use fines, either as pellets or sinter feed.
Since pelletisation involves sizeable cost in the form of capital,
energy and water (the last two being scarce), it would be more
appropriate in my view, to use sinter-based blast furnaces for further
steel making.
Further, I am told while pelletisation improves
metallization marginally (just around 1-2%), sintering on the other
hand can significantly enhance the Fe content by about 5-8%.
Except US, globally pellets are not used extensively :
Sinter %
Pellet %
USA
10
82
EU
62
25
Japan
74
6
South Korea
75
10
China
70
12
● Fines-based technologies for steel will enable us to utilise fines
produced in the country from the existing mines and minimize the
necessity to export fines. Unless steps are taken right now in this
direction, exports will have to continue to supply lumps to the
domestic industry, basically sponge iron plants. Any attempt to
reduce or stop export of fines will directly affect the production of
iron ore and make availability of lumps difficult and costly.
● Indian iron ore contains high alumina which requires more energy in
blast furnace.
The steel industry therefore consumes high Fe
content to compensate for extra energy cost.
The mechanical
beneficiation is a costly proposition though TATAs are reported to
have attempted it successfully. Would it therefore be not more
prudent to import low alumina iron ore to blend with high alumina
Indian iron ore?
•
The above discussion leads us to the following conclusions :
 there would be no shortage of iron ore during the 12th Five Year Plan
period.
In fact the country already produces more iron ore than
estimated the last year of 12th Plan.
 there should be no allocation of captive mines so that the surplus
capacity in the existing mines are fully utilized.
 till the surplus production from the existing mines is fully utilized, there
should be no curtailment / ban on the export of iron ore.
 import low alumina iron ore to physically blend with high alumina Indian
ore.
● The concept of granting captive mines to steel or aluminium plants is a
typically Indian phenomenon. This has deprived the country of worldclass standalone resource mining companies which could have led to
sustainable development of iron ore resources with attendant benefits
such as development of infrastructure and socio-economic growth in
areas where these could have developed. This has created distortion.
While the companies which have captive mines have either become
inefficient leading to almost stagnant steel production or have
generated exorbitant profits leading to the purchase of sick steel
companies abroad to provide jobs and investment in those countries.
The steel companies who do not have captive mines clamour for
shortage of iron ore where there is none and high prices. The whole
policy of grant of captive leases therefore requires a re-look.
II ─ MANGANESE ORE
The demand for manganese ore as against projected production during 12th
Five Year Plan has been estimated as under:
Table-3
Projected production and demand of Manganese Ore
during 12th Five Year Plan
(a) Production
(b) Demand
Total
(i) Domestic
(ii) Export :
Production for
ferro-alloys
(c) Gap between
supply and
demand
2011-12 2012-13 2013-14
3000
3210
3430
(Qty. : `000 tonnes)
2014-15 2015-16 2016-17
3670
3930
4200
4032
2477
1555
4528
2963
1565
4982
3408
1574
5565
3981
1584
6177
4576
1601
6820
5193
1627
1032
1318
1552
1895
2247
2620
Source : 12th Five Year Plan document
● As against this, the production, consumption and exports of manganese ore
over the last five years are as under :
Table-4
Production, consumption and exports of Manganese Ore
Year
Production
Consumption
Export
2006-07
2007-08
2008-09
2009-10
2010-11
2116
2697
2789
2492
2881
2314
2496
2747
3025
NA
170
170
191
291
152
(Qty. : `000 tonnes)
Quantitative
ceiling for exports
700
700
700
700
700
Source: 1. Indian Bureau of Mines (IBM), Nagpur
2. MMTC, New Delhi
●
Indian manganese ore by and large has high phos content and therefore not very much
required by steel / ferro-alloy plants. Many manganese producers , such as FACOR, have
tried to set up beneficiation plants to reduce phos content but could not succeed. The best
beneficiation at reasonable cost is to blend with low phos imported ore.
In the past,
manganese producers were pleading with Ministry of Steel to allow export of manganese not in
demand in India. The Ministry of Steel, under pressure of ferro-alloys industry did not allow
with the result, India became an unreliable supplier that despite ceilings of 7 lakh tonnes, the
exports are tapering off. Neither the domestic industry picked up manganese ore produced in
the country nor would it allow export on the plea that it was a scarce resource. The result was
that due to domestic demand crunch and hardly any export outlet, a large number of
manganese mines have closed down. On the other hand, imports are rising at phenomenal
speed as can be seen from the following table:
Table-5
Import of Manganese Ore
(Qty. : `000 tonnes)
Year
Imports
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
13
284
686
852
798
1000
Source: MMTC, DGCIS, IBM
● International trade is a two-way traffic: a country exports products which are
either surplus or not required in the country and imports what it requires. India
presents a spectacular phenomenon: you only supply manganese ore to
domestic industry and if they don’t require, better close down. This is what
happened somewhat in the case of mica with the result that synthetic
substitute with better physical and chemical composition has taken over
natural mica. Indian mica mines are closed and the resource is lost for all
time to come.
● In the same vein, to the annoyance of my ferro-alloy friends, may I ask through
this forum why the Ministry of Steel is allowing the export of ferro-manganese,
a scarce resource. I would also suggest that in order to revive the closed
mines, the Government of India should clamp steep import duty so that
domestic ferro-alloy industry is persuaded to use domestic material with
imported low phos manganese ore.
III ─ CHROME ORE
● The demand for chrome ore as against projected production during
12th Five Year Plan has been estimated as under :
Table-6
Projected production and demand of Chrome Ore
during 12th Five Year Plan
(Qty. : `000 tonnes)
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
(a) Production
3500
3745
4007
4288
4588
4909
(b) Demand for ferro-chrome
Total
1055
1161
1277
1406
1570
1726
(i) Domestic
555
611
672
741
838
921
(ii) Export
500
550
605
665
732
805
(c) Total chromite
2638
2903
3193
3515
3925
4313
demand
(d) Surplus
862
842
814
773
663
596
Available
Source: 12th Five Year Plan document
● As against this, the production, consumption and exports of chrome ore
over the last five years are as under :
Table-7
Production, consumption and exports of Chrome Ore
(Qty. : `000 tonnes)
Year
Production
Consumption
Export
2006-07
2007-08
2008-09
2009-10
2010-11
5296
4873
4073
3426
4262
1785
2499
2162
2344
NA
395
195
41
93
35
Quantitative
ceiling for exports
400
300
300
300
300
Source: 1. Indian Bureau of Mines (IBM), Nagpur
2. MMTC, New Delhi
● Chrome concentrate, beneficiated out of low grade chrome ore and not
required in the country, is outside the purview of quantitative ceilings.
Their exports over last five years have been as under :
Table-8
Exports of Chrome Concentrate
(Qty. : `000 tonnes)
Year
2006-07
2007-08
2008-09
2009-10
2010-11
Source: MMTC, New Delhi
Exports
698
329
336
492
492
● The exports of chrome ore have dwindled because of heavy exports duty of
Rs. 3000/- per tonne which will be 30% ad volerum hereafter. On the one
hand there is a heavy export duty on the exports, there is free imports of
chrome ore into the country to the detriment of domestic industry :
Table-9
Import of Chrome Ore
(Qty. : `000 tonnes)
Year
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Import
5
5
121
94
96
72
Source: MMTC, DGCIS
● It is surprising that whereas there is a restriction on the exports of chrome ore,
there is no restriction on the exports of ferro-chrome. This goes counter to the
argument of steel / ferro-alloy lobby which cries about the exports of scare
chrome ore resources whereas they are themselves exporting chrome with fuel,
a scarce resource, as additional element. In order that the country’s resources
are properly utilized to the optimum level, there should be heavy import duty on
the imports of chrome ore.
IV – REFLECTIONS ON MMDR BIL, 2011
● The MMDR Bill, 2011, replacing the earlier Mines and Minerals
(Development and Regulation) Act, 1957 was tabled in Parliament on
12th December, 2011. The Bill has been referred to the Standing
Committee on Coal & Steel. The proposed Bill is very retrograde and
will thwart the development of mineral resources in the country. In
fact, a vast amount of Indian capital which could have been invested
in the country for development of mineral resources has been diverted
to foreign countries for development of mineral resources in those
countries. There will provide economic benefits to the communities
residing in those countries.
The mineral resources in India are
mostly located in backward and tribal areas where naxalite activities
are at its peak. If the conditions in India had been congenial for
investment, this capital could have been employed domestically for
better economic and social benefits to communities in these tribal and
backward areas.
● FIMI has submitted its views and suggestions to the Standing
Committee for Coal & Steel. Some of the suggestions are as under :
 In MMDR Bill 2011, the power to grant and extend concessions has been
given to State governments even for those minerals which were so far in
Part C of First Schedule of the MMDR Act 1957, namely, asbestos, bauxite,
chrome ore, copper ore, gold, iron ore, lead, manganese ore, processing
stones and zinc. It may be noted that, since most such concessions will
now be auctioned, this will require `notifying’ such areas to invite
competitive bids, deciding reserve price as well as expected price,
preparing prospecting reports, feasibility reports, mine plans, seeking
approvals from IBM for mine plan and MoEF (for forest lands) and
landowners.
We feel that most State Governments do not have the
capacity to undertake all these activities and therefore will remain a nonstarter. As the schedule minerals are very important from the
perspective of national economy and require huge investments in
exploration and development, the role of Central government is very
significant.
 the provisions relating to auction of exploration and mining concessions will
discourage serious investors, particularly foreign investments from coming
to the country’s mineral sector which was the primary objective behind Hoda
Committee’s recommendations and NMP 2008’s policy commitments.
Even in the countries like Russia & Kyrgyzstan which sometimes follow
tender / auction route, prospecting / exploration licences are never
auctioned.
It may be noted that NMP 2008 does not talk about
auctions at all.
 the regulatory framework emerging out of the MMDR Bill 2011 is very
complex and difficult, if not impossible, to implement particularly by the
State Governments to whom most of the powers have been devolved under
the proposed Bill;
 all applications pending at the time of commencement of new Act will lapse,
new applications for prospecting license have a moratorium of two years (+
1 year extension), and no direct applications for mining leases will be
entertained. A quick calculation indicates that no new mines will see the
light of day for next 15-20 years if the Bill becomes Act as proposed, while
the country’s economic growth demands more and more mined resources;
 India’s mining sector is already the highest taxed in the world, additional
provisions (like contribution to District Mineral Foundation, State/Central
Cess, high license fee etc.) will make it unviable to do mining in India;
 special Courts and very stiff punishments and penalties have been
prescribed; while FIMI is all against illegal mining, we believe that adequate
implementation and good governance are required rather than more laws to
prevent illegal mining and
 numerous new regulatory bodies are to be created as per the proposed Bill,
viz., NMRA, SMRA, NMT, SMT, NMF, SMF, DMF, etc. some of which will
duplicate the work of existing bodies like IBM. We feel this will create more
confusion.
● In view of the above, our broad suggestions and requests for the
consideration of the Committee are ─
 Prior approval of Government of India for minerals in Schedule First in
Part C of MMDR Act 1957 (now Part D in MMDR Bill 2011) should be
retained;
 auction system should be scrapped;
 the contribution to DMF should be reduced to 26% of royalty paid during
the previous financial year; State/Central Cess should not be levied at all;
the NMRA/NMT/SMRA/SMTs should be funded out of Centre / State
budgets as in the case of CERC/SERC/TRAI/IRDA & appellate authorities;
 special courts for mines not required; penalties / punishments under
existing MMDR Act 1957 are adequate, provided these are strictly
enforced and
 in view of the growing importance in domestic market and export trade,
granite should be declared as major mineral.