Save steel, but not by sacrificing mining, Auto News, ET Auto


\"OPINION:A proposal is firming up in the steel ministry to regulate iron ore prices, so that the steel industry would get its key input cheap.

The finance ministry, the commerce ministry and state governments that have sizeable royalties from any kind of mineral, not just iron ore, must raise their voice against this move and prevent a throwback to the time when India used to regulate mineral and metal prices.

The whole point of abolishing captive mining and throwing mining rights open to the highest bidder is to allocate resources rationally and remove one major avenue of crony capitalism.

It is strange that the steel ministry should be thinking of reversing the logic of such market orientation the present government has championed ever since it took office.

Steel is a globally traded commodity. Indian steel producers benchmark their output price to import parity. That is precisely why it got the government to set a minimum import price, when global slowdown and a supply glut in China combined to push steel prices down around the world. That is also why it is now protected by anti dumping duties on imported steel.

When output prices are market-linked, what is the rationale for asking for repressed input prices? Mining is an economic activity that employs a large number of people in backward areas of the country.

It deserves to grow, adopt the latest technology for both raising production and improving safety, and expand in scale. It must be encouraged as a standalone activity and not seen only from the perspective of the industry that uses its output as input.

Many state governments depend on hefty mining royalties, levied ad valorem, for a sizeable chunk of their revenue. Such revenues stand to be compromised, apart from the growth of the mining industry per se, from a move to subjugate one industry to the interests of another industry.

As investment improves, the demand for steel would go up. Steel’s salvation lies in investing in itself to raise productivity, which lags that of global peers, and in stepped up capital formation, not in choking the mining industry.


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