How Iron Mines led to the Land Mines

Two reports in the Times of India of 5 Jun 10 highlight a major cause for the alienation of the tribals of the Red Corridor – mining. The first by Shankar Raghuraman takes a detailed look at the economics behind the iron ore mining business in the Chhatisgarh and Jharkhand areas. He writes that:

At the turn of the millennium in 2001-01, India exported iron ore worth a measly Rs 358 crore. By 2008-09, that figure was up to Rs 21,725 crore, a sixty-fold jump in just seven years.

Driving this export of ore were several factors. One was the decanalisation of exports of ore with an iron content of 64% or less in the late 1990s. The other was China’s seemingly insatiable appetite for iron ore in the run-up to the 2008 Beijing Olympics. As a result, the international price of ore — with 63% iron content — soared to $200 per tonne in March 2008, more than four times the price five years ago.

Indian ore exporters thus had a ready and profitable market. The icing on the cake was provided by the royalty rates charged by the government. The rates fixed in October 2004 varied from as little as Rs 4 per tonne for low-grade ore to a maximum of Rs 27 per tonne for the highest grades. There was also no export duty.

To see what this meant, check out what the Karnataka Lok Ayukta had to say on the allegations of illegal mining in the Bellary region of the state. Its report submitted in December 2008 pointed out that when the export price was hovering around Rs 6,000 to Rs 7,000 per tonne, the state government was getting between Rs 16 and Rs 27 by way of royalty. The extraction cost to the miner was, by the state’s own admission, of the order of Rs 150 per tonne. The Lok Ayukta noted that even if the transportation cost was estimated at Rs 250 per tonne, the total cost for the exporter would be not more than Rs 427 per tonne.

Since the export price of the ore even in a slump was never lower than Rs 1,500 per tonne, that would leave a neat profit of Rs1,073 per tonne. Out of this, the state was getting at best Rs 27.

So outraged was the Lok Ayukta by these calculations, that the report went on to advocate a complete ban not just on export of ore but also on its trading, saying it should be reserved only for captive mining by domestic steel producers.

Truly ironic!

The second report by Rajeev Deshpande highlights the PMO’s role in setting right the wrongs in the proposed mines and minerals bill.

The attempts to turn the clock back on the bill are seen to be rooted in its provision that 26% of profits earned by mining companies be used for the benefit of those affected by mines. This is seen to be in step with Congress chief Sonia Gandhi’s inclusive agenda as it addresses the view that alienation pushes tribals towards Maoist ranks.

The profit-sharing clause has worried mining lobbies and though some queries were raised on whether 26% was too high a slice to be hived off, senior law ministry sources said this was not an issue. Profit sharing would counter the argument that Naxalism was the result of an exploitative state. How the 26% was to be utilised would be defined in rules accompanying the legislation’s notification.

It remains to be seen how the bill finally turns out and then it remains to be seen whether the proposed 26% will ever reach the tribals.


One Response to “How Iron Mines led to the Land Mines”

  1. […] This video needs to be viewed in relation to our post entitled ‘How Iron Mines led to Land Mines’. […]

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