Friday, October 17, 2008
Thursday, October 16, 2008
Monday, October 13, 2008
Whose brakes failed - Prem Shankar Jha
Prem Shankar Jha
October 05, 2008
First Published: 22:40 IST(5/10/2008)
Last Updated: 22:10 IST(6/10/2008)
Whose brakes failed?
http://www.hindustantimes.com/StoryPage/Print.aspx?Id=25c3d8e9-74e5-43e8-94d3-dd1d2be21992
Ratan Tata claims that he has taken the decision to pull the Nano project out of West Bengal with great sadness. He has held one, single, person responsible for his decision - Mamata Banerjee - who "held a gun to his head and pulled the trigger". Industry leaders have queued up behind him to predict a dire future for Bengal. "If it is difficult for the state to ensure security for someone like the Tatas," said R. Seshasayee of Ashok Leyland, "it is easy to imagine what will happen to others."
There is, however, another side to this story. Had you been listening closely to Tata´s press conference, you would have heard him say, "We believe compensation has been paid and that it is a fair compensation.." Paid by whom? Not by the Tatas. And that is the key to understanding why the company is so casually exiting West Bengal today. The Tatas did not pay for the land. The Rs 131 crore compensation paid to farmers and sharecroppers as of December 2006 was paid by the West Bengal government. The Tatas had taken the land from the West Bengal government on lease and the lease rent is a pittance.
In reality, therefore, the Tatas have pulled out so quickly because they had very little at stake in West Bengal. It is true that their investment in the Nano project runs to around Rs 1,500 crore. But the overwhelming proportion of this money has been spent on machinery - the hugely expensive robots that man the assembly lines, the tool and die, body and paint shops in any car plant today. The Tatas have been moving these out for some time. They will also move out generators, computers, specialised cabling and all other moveable items of office and factory equipment. Their final loss will thus be the flooring of their sheds, their investment in infrastructure, and the actual cost of erection of the plant and installation of machines. This will not be a small sum, and will be a dead loss, but one suspects that it will be much less than what West Bengal´s government has sunk into the acquisition of the land.
If the Tatas are not quite the wounded victims that Ratan Tata has made them out to be, Mamata Banerjee is not quite the villain she has been portrayed as being. If the Left and future governments, both in West Bengal and in New Delhi, learn the right lessons from Singur, she may well turn out to be India´s saviour. My eyes were opened to this possibility when I was shown Bengali TV coverage of how the land was actually acquired in 2006.
For the better part of 20 minutes, I saw sticks in policemen´s hands rising and falling with metronomic regularity to the accompaniment of sickening thwacks of wood meeting flesh. As the beating continued, the policemen leant further and further forward. It was apparent that their prey were on the ground but still being beaten. I saw men in their 60s being led away with torn and bleeding head wounds, and weeping, bruised women being supported out of the villages by social workers and Trinamool cadres. There were endless reels of footage, but I could not take any more.
Very little of this footage had appeared in the national channels. And the media had made it out that it was the Trinamool that had blocked the roads, bottled up the villagers and `forced´ the police to resort to `lathi charges´. No one bothered to ask just how the villagers´ consent had been obtained. No one asked why 400 or so of them were demanding their land back. Instead, we were deluded with `information´ that most of the landowners were absentees, and already had jobs in Kolkata and elsewhere. Not one commentator mentioned that with all new non-agricultural jobs being created in the unorganised sector and absolutely no form of social insurance, the little bits of land that the owners had were their ultimate and only security in life.
Are the blood and tears of the poor a necessary price of `development´? Was there no way of making the landholders and sharecroppers in Singur beneficiaries of `development´ instead of its victims? There was, but the Tatas never even considered it and took refuge in the legal plea that they were not involved in the acquisition of the land.
To see how easy it would have been to co-opt the landowners and sharecroppers, one needs to ask just one counterfactual question: what would have happened if the Tatas had decided to set aside just one quarter of 1 per cent of their annual sales revenue and distributed it as an annual royalty to the owners and sharecroppers, for the use of their land? With an annual turnover of Rs 5,000 crore (from 500,000 cars), the royalty would have amounted to Rs 125,000 per acre per year to be split between landowners and sharecroppers. To recover this added outlay, the Tatas would have had to increase the price of their car by only Rs 250.
Would Mamata Banerjee really have spurned such an offer? Would the farmers have allowed her to? A senior Trinamool member of the Rajya Sabha told me some weeks ago that if the Tatas were prepared to make such an offer, Mamata would most probably accept it. But the Tatas never made it.
Ratan Tata cannot be blamed for not trying an approach that has never been tried before in this country. But what he has proved, beyond a shadow of doubt, is that he is no Jamshed Tata.
Today it is imperative for industrialists not to draw the wrong lessons from the Nano debacle. The Tatas may be able to leapfrog to Uttarakhand, Haryana, Karnataka or Maharashtra. All those governments are rubbing their hands with glee at the prospect of `bagging such a prestigious project´. But they haven´t faced their people yet, and the poor will also be drawing their lessons from Singur.
The stark truth is that the country is on the brink of class war. Bastar is today its epicentre. The security forces are fighting a losing battle against an estimated 6,000 armed Maoists who are receiving substantial aid from the local people because the state of Chhattisgarh has lined up $7.28 billion of investment in steel plants and iron ore mines in the next five years and has given out more than 150 prospecting licences covering 400-3,000 sq km to companies wanting to mine iron ore, diamonds, gold and other non-ferrous ores.
Development consumes land, and faster development consumes it faster. Singur, and Bastar are only the beginning.
Prem Shankar Jha is the author of The Twilight of the Nation-State
October 05, 2008
First Published: 22:40 IST(5/10/2008)
Last Updated: 22:10 IST(6/10/2008)
Whose brakes failed?
http://www.hindustantimes.com/
Ratan Tata claims that he has taken the decision to pull the Nano project out of West Bengal with great sadness. He has held one, single, person responsible for his decision - Mamata Banerjee - who "held a gun to his head and pulled the trigger". Industry leaders have queued up behind him to predict a dire future for Bengal. "If it is difficult for the state to ensure security for someone like the Tatas," said R. Seshasayee of Ashok Leyland, "it is easy to imagine what will happen to others."
There is, however, another side to this story. Had you been listening closely to Tata´s press conference, you would have heard him say, "We believe compensation has been paid and that it is a fair compensation.." Paid by whom? Not by the Tatas. And that is the key to understanding why the company is so casually exiting West Bengal today. The Tatas did not pay for the land. The Rs 131 crore compensation paid to farmers and sharecroppers as of December 2006 was paid by the West Bengal government. The Tatas had taken the land from the West Bengal government on lease and the lease rent is a pittance.
In reality, therefore, the Tatas have pulled out so quickly because they had very little at stake in West Bengal. It is true that their investment in the Nano project runs to around Rs 1,500 crore. But the overwhelming proportion of this money has been spent on machinery - the hugely expensive robots that man the assembly lines, the tool and die, body and paint shops in any car plant today. The Tatas have been moving these out for some time. They will also move out generators, computers, specialised cabling and all other moveable items of office and factory equipment. Their final loss will thus be the flooring of their sheds, their investment in infrastructure, and the actual cost of erection of the plant and installation of machines. This will not be a small sum, and will be a dead loss, but one suspects that it will be much less than what West Bengal´s government has sunk into the acquisition of the land.
If the Tatas are not quite the wounded victims that Ratan Tata has made them out to be, Mamata Banerjee is not quite the villain she has been portrayed as being. If the Left and future governments, both in West Bengal and in New Delhi, learn the right lessons from Singur, she may well turn out to be India´s saviour. My eyes were opened to this possibility when I was shown Bengali TV coverage of how the land was actually acquired in 2006.
For the better part of 20 minutes, I saw sticks in policemen´s hands rising and falling with metronomic regularity to the accompaniment of sickening thwacks of wood meeting flesh. As the beating continued, the policemen leant further and further forward. It was apparent that their prey were on the ground but still being beaten. I saw men in their 60s being led away with torn and bleeding head wounds, and weeping, bruised women being supported out of the villages by social workers and Trinamool cadres. There were endless reels of footage, but I could not take any more.
Very little of this footage had appeared in the national channels. And the media had made it out that it was the Trinamool that had blocked the roads, bottled up the villagers and `forced´ the police to resort to `lathi charges´. No one bothered to ask just how the villagers´ consent had been obtained. No one asked why 400 or so of them were demanding their land back. Instead, we were deluded with `information´ that most of the landowners were absentees, and already had jobs in Kolkata and elsewhere. Not one commentator mentioned that with all new non-agricultural jobs being created in the unorganised sector and absolutely no form of social insurance, the little bits of land that the owners had were their ultimate and only security in life.
Are the blood and tears of the poor a necessary price of `development´? Was there no way of making the landholders and sharecroppers in Singur beneficiaries of `development´ instead of its victims? There was, but the Tatas never even considered it and took refuge in the legal plea that they were not involved in the acquisition of the land.
To see how easy it would have been to co-opt the landowners and sharecroppers, one needs to ask just one counterfactual question: what would have happened if the Tatas had decided to set aside just one quarter of 1 per cent of their annual sales revenue and distributed it as an annual royalty to the owners and sharecroppers, for the use of their land? With an annual turnover of Rs 5,000 crore (from 500,000 cars), the royalty would have amounted to Rs 125,000 per acre per year to be split between landowners and sharecroppers. To recover this added outlay, the Tatas would have had to increase the price of their car by only Rs 250.
Would Mamata Banerjee really have spurned such an offer? Would the farmers have allowed her to? A senior Trinamool member of the Rajya Sabha told me some weeks ago that if the Tatas were prepared to make such an offer, Mamata would most probably accept it. But the Tatas never made it.
Ratan Tata cannot be blamed for not trying an approach that has never been tried before in this country. But what he has proved, beyond a shadow of doubt, is that he is no Jamshed Tata.
Today it is imperative for industrialists not to draw the wrong lessons from the Nano debacle. The Tatas may be able to leapfrog to Uttarakhand, Haryana, Karnataka or Maharashtra. All those governments are rubbing their hands with glee at the prospect of `bagging such a prestigious project´. But they haven´t faced their people yet, and the poor will also be drawing their lessons from Singur.
The stark truth is that the country is on the brink of class war. Bastar is today its epicentre. The security forces are fighting a losing battle against an estimated 6,000 armed Maoists who are receiving substantial aid from the local people because the state of Chhattisgarh has lined up $7.28 billion of investment in steel plants and iron ore mines in the next five years and has given out more than 150 prospecting licences covering 400-3,000 sq km to companies wanting to mine iron ore, diamonds, gold and other non-ferrous ores.
Development consumes land, and faster development consumes it faster. Singur, and Bastar are only the beginning.
Prem Shankar Jha is the author of The Twilight of the Nation-State
Thursday, September 18, 2008
Wednesday, September 17, 2008
Will Singur-type problems hit investment growth?
Will Singur-type problems hit investment growth?
Will Singur-type problems hit investment growth?
Business Standard | September 17, 2008
Will Singur-type problems hit investment growth?
Business Standard | September 17, 2008
Since most projects can be shifted to other states, the problem will be minimal, especially if industry can find ways to make farmers partners in their profits.
Rajeev Chandrasekhar, Member of Parliament and President, FICCI
For every Singur, there is an example of fairly successful land acquisition somewhere else in the country
The Indian economy over the last decade is a more diversified economy that ever before. Therefore, any claims of slowdown (as true as that possible slowdown may be) being linked to land acquisition issues is laughable.
Admittedly, with economy on its growth drive, the appetite for land for use by business is clearly on the rise - as investments rise and more industries are set up. Industry and business are meeting this appetite for land by acquiring land from existing farmers and other owners of land with some form of state intervention through a land acquisition process.
Since these projects have a consequential effect in creating jobs and stimulating the local economy, there is a competition amongst states to attract these projects - which is in turn causing the states to trot out promises of cheap land amongst other sops to investors.
The population density in our country is high. Dependence on land for earning a living is also very high. Nearly 55 per cent of the population is dependent on the agriculture sector for its livelihood. In these circumstances, there is bound to be resistance and some opposition whenever steps are taken to bring in more land under industry by fiat and executive action rather than negotiation.
In recent days, there has been a debate around the Tata/Nano investment in West Bengal being impacted by delays in or problems with land acquisition for that project in Singur.
But at the same time, there are many investments around the country where land had been acquired for the project successfully, with no disputes or opposition from the local community/farmers/sellers.
Which leads one to conclude that the problem isn't with industry requiring more land but with the process adopted for land acquisition process in this case.
The common thread that runs through all the 'land acquisition disputes' is the perception of unfair deal to the farmer/seller or the coerced/forced acquisition of land from an unwilling farmer/seller by using the power of the state. This is doomed to fail, if not in the short term then definitely in the medium term.
The solution is simple, as pointed by Finance Minister Chidambaram during one interaction at FICCI - business shouldn't try and deprive an unwilling farmer of his land. It has far reaching consequences and repercussions - especially when businesses depend on the goodwill of the communities they serve.
The Singur dispute points to a need for a clear-cut national policy for acquisition strategy. The policy should clearly mention acquisition hierarchy - barren over fertile land, single-cropped land over multi-cropped land etc and a process of compensating the farmers that is based on the inviolable principle of equity and fairness - to have either a process of consent acquisition where the investor makes the deal with the farmer/seller for most of the requirements (say 70 per cent) and have the state come in and help with the balance on the same terms.
A better solution is to allow the farmers to remain stakeholders in the development in the area, by either having him lease the land or giving him ownership of tracts of land around the project.
Sajjan Jindal, vice-chairman and MD, JSW Steel [Get Quote] group
Unless ways are found to ensure farmers have a stake in the project's progress, the issue will get more complex
Acquiring land is a difficult and challenging task. Especially in large projects where you need to acquire a large chunk of contiguous land, but there are ways and means to tackle that. For industry, the best option is if the government acquires the land, but given the sensitivity of the issue this is becoming increasingly difficult.
The other option is that the industry negotiates directly with the farmers or land owners. Of course, you can't get all of the land but even if you get 60-70 per cent, the government can then step in and manage to take over the balance.
The basic point is that land owners who are giving the land for projects should be fairly compensated not only in cash but through involving them in the development of the project.
That is what we do wherever we set up new projects. Whether it is Maharashtra, Vishakhapatnam or Rajasthan, we are creating special purpose vehicles for different projects where farmers will be made stakeholders and once the project is developed, the SPVs will be merged with the main companies.
Unless we are sensitive and feel the need of the farmers, the issue will get more and more complex. The way Singur, Nandigram, Orissa and Jharkhand have happened, it would just get more complicated.
In Barmer, for our power project, we had a situation where the government would have to acquire 20,000 acres for mining lignite. The government issued the notice to the farmers to surrender the land but the farmers approached our CEO and said they were not ready to part with the land. So we had discussions with the farmers and when I went to the site, around 10,000 farmers collected there.
I convinced the chief minister not to acquire the land and said that after the lignite was taken out, the land would be returned to farmers even if it was after 50 years so that the next generation could farm on it.
The message is loud and clear. You can't take police and government help to push the farmers aside. Of course, 10 per cent can be miscreants who get politicised and have to be tackled with government help. But in any situation if 60-70 per cent people are with you, the rest can't stall the project.
We never faced any problem in West Bengal with regard to land acquisition. We were very careful not to touch fertile land. We did not touch land where three or four crops were being grown. It's a conscious decision to not touch multi-crop land.
However, if for the need of the project we have to acquire some fertile land, then we would more than compensate for it by, maybe, some government land which could be converted to fertile land.
I think state governments would also have to play a proactive role because every industry house is not the same. But at the same time, state governments should be sensitive to the needs of the farmers and should also not touch fertile land or that close to the city, which might have potentially higher value in the future. State governments should try and create a land bank in such areas where not too many crops are grown.
(The author is president, Assocham)
Friday, June 13, 2008
DNA - Opinion - Digging up the dirt - Daily News & Analysis
DNA - Opinion - Digging up the dirt - Daily News & Analysis
Digging up the dirt
NN Sachitanand
Tuesday, June 10, 2008 21:28 IST
Much is wrong with the way mining is done in India
In late April this year, Naxalites attacked an iron ore mining camp of the Essar group in Chattisgarh and destroyed over 50 trucks and other heavy equipment.
This is not an isolated incident; nor will it be the last. It can be seen as a manifestation of the frustration felt by locals in not getting a share of the wealth extracted by mining companies.
In all my travels across prime mining territory in India, the one common factor encountered — be it in Bihar, Chattisgarh, Jharkhand, Orissa, Andhra Pradesh, Rajasthan or Karnataka — was the acute underdevelopment and impoverishment of the hinterland. As per the Hindi proverb, ‘darkness below the lamp’, the mineral wealth of these places has least benefited the surrounding indigenous communities.
The ministry of mines is purported to have formulated a new National Mining Policy. This is expected to provide a fillip to the mining sector, which currently contributes only 2.8 per cent of the country’s GDP.
That figure is expected to go up to 5 per cent, while the total investment likely in the sector is around Rs5,00,000 crore over the next six years. The focus of the policy seems to be on addressing the obstacles faced by the mining companies, such as delays in statutory clearances. This is getting the priorities wrong.
The government should realise that in the last two decades, a groundswell of bitterness, animosity and militancy has spread among the locals — mostly tribals — of mineral-rich areas of the country.
There is a sense of outrage at being denied a just share of the wealth derived from exploitation of their regions. Fishing in these troubled waters are local politicians, NGOs and Naxalites.
As a result, several major mining projects, particularly in the bauxite-rich Eastern Ghats, have not been able to get off the ground. I will not be surprised if a similar fate befalls iron ore projects in the Chattisgarh-Jharkhand region.
Any mining policy that ignores this problem is akin to an ostrich sticking its head in the sand. Enhancing royalty rates and converting them to ad valorem duties has been mooted, with the hope that the state governments will recycle the increased income to development of the backward mining areas.
Unfortunately, history belies this. Mining companies have the reputation of declaring less than what they actually extract.
The royalty is swallowed up by the state governments and the dole out to mining regions is paltry. Perhaps legislation should make it mandatory for a state government to spend a major portion of ad valorem royalties for development within the host districts of the mines.
Aside from low level manual tasks, locals are not employed. Even indirect tertiary services such as transport, catering, repair workshops and small retail are usually bagged by the more entrepreneurial immigrants.
So locals do not perceive mining projects as a way up the economic ladder and have become indifferent or hostile to them. The common excuse made by mining companies is that the tribals are not skilled in mining tasks.
That makes it more important for mining companies to invest in training. The new mining policy should formulate norms for hiring and training locals and provide monetary and management aid to establish tertiary service outlets.
Conservation is as important as extraction in mining. Get-rich-quick attitudes combined with primitive extraction methods such as blasting and handpicking has led to enormous waste in mining marble in Rajasthan and granite in Karnataka.
Unscientific small-scale mining has led to manual cherry-picking of rich lumps that has left iron ore mines in Karnataka with large areas of relatively poor ore that should have been simultaneously mined in a scientific manner to yield a reasonable blend. The new policy can lay down standards.
Mining is essentially environmentally destructive. With much of India’s mineral wealth located in forested areas and most of the mining being open-cast, the environmental damage is extreme.
The last two decades have seen legislation that seeks to contain this damage by imposing conditions on mining companies, such as compensatory afforestation and regreening of strip-mined areas. But, by and large, these conditions have been
observed more in the breach.
The wasteland left behind by those extracting marble in Makrana (Rajasthan), granite in Karnataka, iron ore in Goa, coal in Jharkhand and chromite in Sukinda (Orissa ) is typical of the industry in India.
The new National Mining Policy needs to address this issue squarely and put the onus on redressing the destruction solely on mining companies.
Going for the gold
The new mining policy should formulate norms for hiring and training locals
The writer is a commentator on public affairs
Tuesday, June 3, 2008
India: Govt. to impose 15% export duty on iron ore - Metals News - Metals Place
India: Govt. to impose 15% export duty on iron ore - Metals News - Metals Place
Government is believed to have decided to impose 15% export duty on iron ore, used for making steel, which has seen a 50% increase in prices since January, thereby fuelling inflation.
The decision was taken at the meeting of the Committee of Secretaries (CoS) on May 30. The CoS has also decided to roll back export duty on steel, barring primary and semi-finished products, in return for the Rs 4,000 per ton reduction in prices announced by them early last month.
At present, an export duty at a specific rate of Rs 300 per ton is imposed on iron ore with 62% of higher iron content and Rs 50 per ton on lower grade ore. Under the new dispensation, the export duty would be based on the value of the product shipped abroad.
Decisions on both roll back of export duty on steel and imposition of the same on its raw material are expected to be announced in the next few days. The Department of Revenue will notify the decision once the CoS minutes are issued.
Rise in raw material prices, strong demand in international and domestic market and increase in global steel prices are some of the reasons cited by the industry for increase in the domestic prices, which have been further impacted by the demand-supply mismatch. – MyIris
Sunday, June 1, 2008
Saturday, May 31, 2008
Monday, May 5, 2008
Sunday, May 4, 2008
Mittal to spend Rs 1,200 cr on Orissa rehab
Mittal to spend Rs 1,200 cr on Orissa rehab
| Mittal to spend Rs 1,200 cr on Orissa rehab |
| BS Reporter / Bhubaneswar May 03, 2008 |
Global steel major ArcelorMittal, who is proposing to set up a 12 million tonne greenfield steel plant at Patna tehsil in Keonjhar district of Orissa, plans to spend about $300 million (about Rs 1,200 crore) on rehabilitation and resettlement (R&R). Only a couple of weeks ago, the company had announced an identical R&R packages for its project in Jharkhand, where it intends to set up an equal-capacity steel plant.
ArcelorMittal's Orissa R&R package is significant because South Korean steel major Posco, which had signed an MoU with the state government to establish a 12 million tonne plant at Paradip 18 months before the Mittals came up with their Orissa proposal, is yet to finalise its R&R package.
Meanwhile, ArcelorMittal has presented its R&R plan to the Keonjhar district administration. It plans to spend the earmarked amount over a period of more than five years.
"We plan to spend about $300 million for the R&R plan over a period of more than five years. The R&R plan has already been submitted to the Orissa government," ArcelorMittal India chief executive officer (CEO) Sanak Misra said.
After meeting Orissa chief minister Naveen Patnaik along with Sudhir Maheshwari and Vijay Bhattanagar, the members of ArcelorMittal's group management board, in the state secretariat today, Misra told the media that their steel plant will come up in two phases of 6 million tonne each. He said the R&R plan of the company was in conformity with the R&R policy of the Orissa government.
The plan envisages dwelling units for each of the displaced family with common facilities. The rehabilitation colonies will have water supply, educational institutions and primary health centres (PHCs).
As per the R&R plan, the company will set up a state-of-the-art industrial training institute (ITI) beside the steel plant. It is in discussion with three leading institutes of the country having previous experience in handling ITIs.
The model, including student strength and the cost of setting up of the ITI, is being worked out. Misra, however, made it clear that the ITI would come up before the commissioning of the plant. The company was in discussion with the state government for the required land, he said.
Official sources said, the company planned to apply the highest standards of corporate social responsibility (CSR) for the Orissa project and intended to make the R&R policy the backbone of the CSR strategy.
Misra said a detail project report (DPR), prepared by M N Dastur & Company (P) Ltd (Dasturco), was being finalised. It would be submitted in June, 2008, he added.
The DPR includes captive mining facilities, captive power supply, water supply infrastructure and other required facilities. It also includes setting up of townships for the company's employees.
The ArcelorMittal CEO also expressed his satisfaction over the land acquisition, saying that it was making good progress.
The company had signed an MoU with the Orissa government in December 2006 for setting up a steel plant at an investment of about Rs 40,000 crore.
Thursday, April 24, 2008
Article on POSCO, co-authored with Dr. Sanat Mohanty
Article published in Seoul Times, Part 1, Part 2 ,Part 3 & appendix 1(response to rediff article:
Saturday, April 5, 2008
Thursday, April 3, 2008
Tuesday, March 4, 2008
Army fights red terror, indirectly
chhattisgarh-net : Message: Army fights red terror, indirectly
Rahul Singh, Hindustan Times
New Delhi THE ARMY is stepping up its training programme for the
Central Police Organisations (CPOs) and state police forces to help
them take on the Naxals, but it has no plans to invade the notorious
Red Corridor Unwilling to see the army reduced to the role of a
paramilitary force, Army chief general Deepak Kapoor has said that it
should be used as a last resort and not the first. The army is
currently involved in bringing out a national internal security
doctrine to deal with the Naxal problem. The army, under ideal
circumstances, would like to focus on its primary role of defending
the country from external aggres- sion, a task that has already been
diluted by prolonged deployment in Jammu and Kashmir and the
Northeast. Another reason why the army is wary of being drawn into
antiNaxal operations is that the socalled Red Corridor envelopes
states that serve as unportant catchment areas for military
recruiting. A senior official said, "Pitting soldiers against their
own people can have disastrous consequences. We have no problems
diverting resources to train CPOs and state police forces." Over 8,500
police personnel have already been trained by the army to wage war
against Naxals. By June 2008, it would have shared its expertise in
guerilla warfare with an additional 6,500 policemen. The standing
committee on defence had noted in a report tabled in Parliament last
year that the use of the army as a substitute for state police
diverted its attention from its prime objective, which is guarding the
frontiers. To address the growing demand by state governments for
military assistance in maintaining law and order, it had recommended
the creation of a separate specialised force for internal security
duties.
Rahul Singh, Hindustan Times
New Delhi THE ARMY is stepping up its training programme for the
Central Police Organisations (CPOs) and state police forces to help
them take on the Naxals, but it has no plans to invade the notorious
Red Corridor Unwilling to see the army reduced to the role of a
paramilitary force, Army chief general Deepak Kapoor has said that it
should be used as a last resort and not the first. The army is
currently involved in bringing out a national internal security
doctrine to deal with the Naxal problem. The army, under ideal
circumstances, would like to focus on its primary role of defending
the country from external aggres- sion, a task that has already been
diluted by prolonged deployment in Jammu and Kashmir and the
Northeast. Another reason why the army is wary of being drawn into
antiNaxal operations is that the socalled Red Corridor envelopes
states that serve as unportant catchment areas for military
recruiting. A senior official said, "Pitting soldiers against their
own people can have disastrous consequences. We have no problems
diverting resources to train CPOs and state police forces." Over 8,500
police personnel have already been trained by the army to wage war
against Naxals. By June 2008, it would have shared its expertise in
guerilla warfare with an additional 6,500 policemen. The standing
committee on defence had noted in a report tabled in Parliament last
year that the use of the army as a substitute for state police
diverted its attention from its prime objective, which is guarding the
frontiers. To address the growing demand by state governments for
military assistance in maintaining law and order, it had recommended
the creation of a separate specialised force for internal security
duties.
Monday, February 25, 2008
Saturday, February 23, 2008
Thursday, February 21, 2008
`Hike in iron ore royalty, export duty will hit mining hard'
The Hindu Business Line : `Hike in iron ore royalty, export duty will hit mining hard'
Phalguna Jandhyala
New Delhi, Feb 20
The Federation of Indian Mineral Industries (FIMI) has said that the proposed move by the Government to increase royalty and export duties on iron ore would adversely affect the mineral's mining industry. Sources in the Mines Ministry told Business Line that the Federation, in a recent memorandum to the Ministry, said that if the proposals were carried out, it would lead to the closure of several mines and in turn, would affect the domestic steel industry. "The members said if the proposals are implemented, then India will be the highest taxed country amongst major iron ore producing regions with the proposed royalty and duty rates and the additional tax burden on exporters will marginalise exports, resulting in the closure of many mines," a source close to the development said. As per estimates, Brazil, the largest iron ore producer with domestic steel production comparable to India, has a royalty of two per cent and no export duty. Similarly, Australia has a royalty of 3.5 to 7.5 per cent, with no export duty, while South Africa has a royalty of only three per cent and also does not impose any export duty. The source said that the Government has proposed a royalty of 10 per cent ad valorem on sales realisation and an export duty of 10 to 15 per cent. Demand projection "The FIMI members said that at the current rate, India should be able to sustain the projected domestic steel demand for close to 200 years and the current iron ore resources of about 25 billion tonnes would last for the next 85 years." He further said that FIMI in the memorandum, has said that with more exploration, development of technology to economically treat lower grade ore and increase use of scrap will further help sustain the need of the domestic steel industry. Government data show that in the last 25 years, while India has increased its iron ore resources by about 45 to 50 per cent, Australia and Brazil have grown their resources ten-fold. "If India were to increase spend on exploration, deploy best-in-class technology and explore new areas, it could add another 20 to 25 billion tonnes of resources," the official said. Currently, India spends only around $5 million on exploration predominantly on coal as compared to $500 million and $150 million in Australia and Brazil respectively. `Not for long' "The FIMI members had also stated that higher profitability of iron ore exporters in recent years is part of a normal industry cycle and in line with that experienced by other sectors. They also said that the current profitability levels will not hold for long as major players from Australia, Brazil and South Africa bring significant new capacity online in the coming years," the official pointed out. He also said that the members feel that the way forward would be to treat iron ore mining as a separate industry. "FIMI has said that by not doing so, a situation similar of what happened to thermal coal will be repeated. They said that despite having an approximate reserves of 80 billion tonnes, power companies would be forced to import around 25 per cent of their requirements by 2012 due to lack of adequate investments in exploration and infrastructure creation," the source said.
Phalguna Jandhyala
New Delhi, Feb 20
The Federation of Indian Mineral Industries (FIMI) has said that the proposed move by the Government to increase royalty and export duties on iron ore would adversely affect the mineral's mining industry. Sources in the Mines Ministry told Business Line that the Federation, in a recent memorandum to the Ministry, said that if the proposals were carried out, it would lead to the closure of several mines and in turn, would affect the domestic steel industry. "The members said if the proposals are implemented, then India will be the highest taxed country amongst major iron ore producing regions with the proposed royalty and duty rates and the additional tax burden on exporters will marginalise exports, resulting in the closure of many mines," a source close to the development said. As per estimates, Brazil, the largest iron ore producer with domestic steel production comparable to India, has a royalty of two per cent and no export duty. Similarly, Australia has a royalty of 3.5 to 7.5 per cent, with no export duty, while South Africa has a royalty of only three per cent and also does not impose any export duty. The source said that the Government has proposed a royalty of 10 per cent ad valorem on sales realisation and an export duty of 10 to 15 per cent. Demand projection "The FIMI members said that at the current rate, India should be able to sustain the projected domestic steel demand for close to 200 years and the current iron ore resources of about 25 billion tonnes would last for the next 85 years." He further said that FIMI in the memorandum, has said that with more exploration, development of technology to economically treat lower grade ore and increase use of scrap will further help sustain the need of the domestic steel industry. Government data show that in the last 25 years, while India has increased its iron ore resources by about 45 to 50 per cent, Australia and Brazil have grown their resources ten-fold. "If India were to increase spend on exploration, deploy best-in-class technology and explore new areas, it could add another 20 to 25 billion tonnes of resources," the official said. Currently, India spends only around $5 million on exploration predominantly on coal as compared to $500 million and $150 million in Australia and Brazil respectively. `Not for long' "The FIMI members had also stated that higher profitability of iron ore exporters in recent years is part of a normal industry cycle and in line with that experienced by other sectors. They also said that the current profitability levels will not hold for long as major players from Australia, Brazil and South Africa bring significant new capacity online in the coming years," the official pointed out. He also said that the members feel that the way forward would be to treat iron ore mining as a separate industry. "FIMI has said that by not doing so, a situation similar of what happened to thermal coal will be repeated. They said that despite having an approximate reserves of 80 billion tonnes, power companies would be forced to import around 25 per cent of their requirements by 2012 due to lack of adequate investments in exploration and infrastructure creation," the source said.
PROCEEDINGS (XIV Lok Sabha) POSCO Project in Orissa...
PART II PROCEEDINGS OTHER THAN QUESTIONS AND ANSWERS (XIV
LOK SABHA)
Title : Shri Basudeb Acharia called the attention of the Minister of Mines to the situation
arising out of recent agreement of Orissa Government with Korean Steel Major POSCO
allowing them to export mineral wealth of the country and steps taken by the Government
in this regard.
SHRI BASU DEB ACHARIA Sir, I call the attention of the Minister of Mines to the
following matter of urgent public importance and request that he may make a statement
thereon :
“Situation arising out of recent agreement of Orissa Government with
Korean Steel Major POSCO allowing them to export mineral wealth of the
country and steps taken by the Government in this regard.”
SHRI BASU DEB ACHARIA : Madam Chairperson, the Memorandum of Understanding
between the Government of Orissa and POSCO of South Korea will facilitate ...(Expunged as
ordered by the Chair) of such scarce mineral iron ore of Orissa. You will be surprised to know
that a huge concession is being given to this particular company. They will set up a steel
plant at Paradeep.
SHRI ARJUN SETHI (BHADRAK): Madam, I would like to draw your kind attention to
his words. The hon. Member, while speaking, has said that 'it will facilitate … of mineral
wealth'. Will it go on record? No Government, whether the Central or State, will …
(Interruptions)
… (Interruptions)
SHRI B. MAHTAB (CUTTACK): If Shri Basu Deb Acharia is going to suggest what
should be the MoU to be entered by the Government of Orissa, let him come up with the
proposal. … (Interruptions)
SHRI BASU DEB ACHARIA : Madam, I have every right to say. If I have used any
unparliamentary words, you can expunge them. I have not used any unparliamentary
word.
SHRI BASU DEB ACHARIA : They will set up a steel plant with capacity of 12 million
tonnes and captive iron ore mines will be given to POSCO[reporter36].
They will extract 600 million tonnes of iron ore from the captive mines. The Steel
Plant will be set up after 33 months from the day of the company getting the licence. Why
such favour is being given to this particular company? They will start extracting iron ore
immediately after the issuance of licence, although the permission and approval of the
Central Government will be required in it.
Out of 600 million tonnes of iron ore, 30 per cent will be exported to Brazil as the
iron ore in Orissa has high percentage of Alumina. On the other hand, they are being
allowed to import similar quantity of iron ore from Brazil, which has lower percentage of
Alumina. Over and above 600 million tonnes, this company will be permitted to export 400
million tonnes of iron ore for their own steel plant in South Korea. It means that 600 million
tonnes per 1,000 million tonnes of iron ore this company from South Korea would get from
Orissa.
Madam, we have 18 billion tonnes of iron ore in our country, and Orissa has 4.5 billion
tonnes of iron ore. Nearly 36 MoUs were signed with various steel manufacturing
companies prior to this MoU. The total capacity for it would be about 40 million tonnes
of iron ore. What was the price at which they were permitted to purchase iron ore from
the Orissa Mineral Development Corporation at the time of signing these 36 MoUs?
They were permitted to purchase iron ore at the market price. What is the price of one
tonne of iron ore today? It is Rs. 2,000. But in the case of POSCO, the cost of extraction
or the total cost of production per tonne of iron ore would be only Rs. 400. Why is there
such a difference in it? Why this particular company is being permitted to take iron ore at
a much lower price? How much will be the loss to the State of Orissa as a result of the
lower price that has been fixed in the MoU? The loss for the Government of Orissa
would be about Rs. 1.20 crore.
Moreover, the steel plant would be set up in the Special Economic Zone (SEZ), and
it would mean that this company would enjoy concessions in income tax, excise duty, and
other taxes. How much would be the loss for the Government of Orissa on this account?
MADAM CHAIRMAN: Mr. Acharia, please be brief. I am saying this because there is
another Calling Attention to be taken up after this. Therefore, please put your question to
the hon. Minister[ak37].
SHRI BASU DEB ACHARIA : I am coming to the question, Madam.
This company first tried to have an MoU with the Government of Brazil. Brazil has
the largest deposits of iron ore. With the same conditions, which the Government of Orissa
has agreed to, the company went to Brazil. But the Government of Brazil did not agree to
those conditions. They agreed to provide iron ore at the market price. The Government of
Orissa has signed an MoU to supply iron ore at a much lower price. Madam, what will be the
benefit for the people of Orissa? A thousand acres of tribal land will be acquired. Total
employment will be only 13,000 as per the statement of the Government of Orissa.…
(Interruptions)
SHRI DHARMENDRA PRADHAN : This is totally wrong information. … (Interruptions)
MADAM CHAIRMAN : I will give time to your leader and he will have his say.
SHRI KHARABELA SWAIN : There is no tribal there. … (Interruptions)
SHRI BASU DEB ACHARIA : In the MoU, rehabilitation and resettlement of tribal people
has not been provided.
SHRI BRAHMANANDA PANDA (JAGATSINGHPUR): He has absolutely no
fundamental idea about what he is talking about.
MADAM CHAIRMAN: Shri Acharia, now there is no point. Please conclude.
SHRI B. MAHTAB : Shri Acharia had himself migrated from Orissa. He should not forget
that fact. I am just reminding him of his ancestors.
SHRI BRAHMANANDA PANDA : The learned Member should have a fundamental idea
of the point before speaking on it.
MADAM CHAIRMAN: Shri Acharia, please conclude now. There is another Member to
speak from your own party. Within two minutes, you will have to conclude.
SHRI BASU DEB ACHARIA : Madam, the Koreans are being given this iron ore despite
India not having enough iron ore reserves even to last for 50 years. Our per capita
consumption is the lowest among the developing nations; it is only 32 kgs. However, the per
capita consumption in China today is 270 kgs. This will not remain at this. Our per capita
consumption will increase. Our demand also will rise. If 30 per cent of the reserves are given
to this particular company, what will happen to the other steel manufacturing companies?
SHRI B. MAHTAB : In China?
SHRI BASU DEB ACHARIA : Already 36 MoUs have been signed. They require huge
quantities of iron ore. I would like to know from the Minister of Mines or the Minister of
Finance, whosoever replies … (Interruptions)
THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): The Minister of Mines will
reply.
THE MINISTER OF MINES (SHRI SISH RAM OLA): I will give the reply.
MADAM CHAIRMAN: Shri Acharia, put your questions please.
SHRI BASU DEB ACHARIA : I would like to know from the hon. Minister as to
how the future requirement of our country will be met. Why such a concession has been
given to this particular company? Why POSCO was not offered market price, as has been
offered to the other 36 companies who will set up the steel plants in the State of Orissa? The
capacity will be about 40 million tonnes. Why in their case it is market rate of Rs.2000 or
Rs.3000, but in the case of POSCO it is only Rs.400?
SHRI B. MAHTAB : Who will give this answer? The Minister of Mines is not capable to
answer this question.
MADAM CHAIRMAN: He will say something. I am giving him chance. It is all right.
SHRI B. MAHTAB : This question can only be addressed to the Orissa Government. This
question has no scope to be answered by the Minister of Mines[KMR38].
Now, there is a need for mines policy. Should not there be a detailed discussion?
There should be a detailed discussion on mines policy before MoUs are signed. …
(Interruptions) Before it is exhausted, the Government of India should announce the mines
policy.
MADAM CHAIRMAN : Keep something
for your own party Member. Now, please conclude.
SHRI BHANWAR SINGH DANGAWAS (NAGAUR): According to the rules, he can be
given only 10 minutes.
MADAM CHAIRMAN: I am looking into it.
SHRI BASU DEB ACHARIA : The Minister of Mines has stated in his statement that the
Ministry of Mines will examine the proposal in detail because the Government of Orissa has
not sent the proposal for approval in accordance with law and in consultation with the
concerned Ministry. When an application is received duly forwarded by the State
Government, the views expressed by the hon. Members here in this House today will be
given due consideration. I would like to know from the Minister, in view of the widespread
criticism in the country in regard to the MoU signed by the Government of Orissa and
POSCO.. … (Interruptions)
SHRI B. MAHTAB : All newspapers supported this MoU. … (Interruptions)
SHRI BASU DEB ACHARIA : Apprehensions have been expressed here about the favour
shown to a particular company and the financial loss for the Government of Orissa as well
as the Government of India. Will the Government of India before approving this
proposal... … (Interruptions)
SHRI ARJUN SETHI : Madam Chairman, my point is.... … (Interruptions)
MADAM CHAIRMAN: You will get time.
SHRI ARJUN SETHI : My point is that whenever any subject concerning the State
Government comes before the House, the same is not allowed. … (Interruptions)
SHRI BASU DEB ACHARIA : But people are complaining...… (Interruptions)
There cannot be any conflict of interest between the development of a State and the
nation development. After all, it is all national resource and if Orissa prospers, the national
also will be benefited. It is a national prosperity. So, there cannot be any dispute about
Orissa's prosperity and the national prosperity. But the issue is that the basic national
resource is limited. We should use it judiciously and carefully taking into account particularly
our per capita steel consumption. What is the projection of demand in the perspective plan
for the coming 20 or 50 years or so when India is emerging as the fast growing economy?
Finance Ministry is always claiming that we are emerging as a very fast growing economy.
We are the fastest growing economy. … (Interruptions) Steel is the key sector. carefully
protect your legal interest, your constitutional interest and your economic interest. But what
I want to know from the Union Government is this. According to Section 5(1) of the Mines
and Mineral Development (Regulation) Act, 1957, the Union Government had given the
prior approval[R39].
On what criteria was the approval given? Did they know that there was going to be
a clause of a swap? If that clause of a swap was taken into consideration, whether the
technology concerned was also taken into consideration? It is because, the technology being
brought in our country is not the latest one… (Interruptions) I am one with the claims made
by our steel majors. I am not naming them.
SHRI B. MAHTAB : Why are you not naming them?… (Interruptions)
SHRI RUPCHAND PAL : Many of our public sector and the private sector steel majors
have stated that they are capable of providing this technology but they are not being given
equal status and there is no level-playing field. What is being given to the multinational
company, had it been given to our steel majors, they could have provided Orissa a new steel
plant with the latest technology. But it is not being done, and it is being denied to them.
(Interruptions)
(Interruptions) … *
SHRI RUPCHAND PAL : Madam, I am asking the Union Government whether there has
been a level-playing field or not.
There was a story about the high alumina content and the technology involved in the
process, what is called the Fenic Process. Does it suggest that we, in the process of our
development of the steel technology, are not at a stage where we could match the technology
and resources that are being provided by the current steel major, who badly needs our
precious underground process, which the world over is yet not planned in a judicious
manner, which is being given a go-bye by the Orissa Government and approved by the
Union Government?
I charge the Union Government whether they have applied their mind before giving
prior approval.
SHRI ARJUN SETHI : Madam, I am very much thankful to the hon. Minister of Mines for
narrating, in detail, in his statement about the MoU that has been signed recently by the
Government of Orissa with the Korean steel major, POSCO. The statement of the hon.
Minister reveals everything. It also clarifies whatever allegations or points have been raised
here. This particular MoU could be possible only because the Government of India -- the
hon. Finance Minister is present here -- have allowed 100 per cent FDI in the mining sector.
In consequence of this particular announcement, this MoU could be possible. Otherwise,
no such MoU could be possible. So, only after the policy decision of the Union
Government to allow 100 per cent FDI in the mining sector, the MoU was signed between
POSCO and the Orissa Government. Madam, the statement of the hon. Minister of Mines
specifically says: “However, the Ministry of Mines is yet to receive any proposal for grant of
prospective licence or the mining lease to M/s. POSCO through the State Government of
Orissa[k40].”
I am simply astonished that incidentally all the hon. Members are from West Bengal.
Fortunately or unfortunately, we do not pull your West Bengal. This is the history. … *
SHRI ARJUN SETHI : Madam, my point is that the Orissa Government is very much
competent, with the approval of the Central Government on policy matter, to enter into
MoUs provided those MoUs do not go against the policies of the Central Government. If
this is so, why are they so much worried? Nothing has yet been achieved. The Orissa
Government has not yet sent the proposal to the Central Government. As has been stated
here by the Government, they will look into the details. They will have consultation on
everything. Why are they still so much agitated about this particular MoU? When the
Government of India has declared that hundred per cent foreign direct investment is very
much there, why are they very much opposed to it? If there is anything - I won’t go into the
details - the Government of Orissa is competent enough to discuss that with the
Government at the Centre. At that point of time, the Central Government can decide
everything on merit. So, there is no point in saying that it has gone against the interests of
the country.… (Interruptions)
MADAM CHAIRMAN: Arjun Charanji, you know that, as a leader, if you want to ask
anything from the Union Government, you can do so by putting questions.
SHRI P. CHIDAMBARAM: If you have some questions, just put them… (Interruptions)
SHRI ARJUN SETHI : Madam, I would like to know whether the lease would be governed
by the Minerals and Metals (Regulation and Development) Act. If so, will the hon. Minister
assure the House that the Government would grant licence to the Government of Orissa as
well as the steel major when it conforms to the provisions of this particular Act?
Madam, it has been said that some amount of minerals will be exported to other
countries, that is, Korea and Brazil. It has been pointed out here and incorporated in the
MoU that swap will be permitted up to 30 per cent provided the POSCO equally imports 30
per cent of the minerals[pkp41].
Moreover, it has also been mentioned in that particular MoU that after having gone
into the details etc., if it is found that it has alumina content to the permissible limit, then
there will be no need of exporting or importing. It has been mentioned there.
LOK SABHA)
Title : Shri Basudeb Acharia called the attention of the Minister of Mines to the situation
arising out of recent agreement of Orissa Government with Korean Steel Major POSCO
allowing them to export mineral wealth of the country and steps taken by the Government
in this regard.
SHRI BASU DEB ACHARIA Sir, I call the attention of the Minister of Mines to the
following matter of urgent public importance and request that he may make a statement
thereon :
“Situation arising out of recent agreement of Orissa Government with
Korean Steel Major POSCO allowing them to export mineral wealth of the
country and steps taken by the Government in this regard.”
SHRI BASU DEB ACHARIA : Madam Chairperson, the Memorandum of Understanding
between the Government of Orissa and POSCO of South Korea will facilitate ...(Expunged as
ordered by the Chair) of such scarce mineral iron ore of Orissa. You will be surprised to know
that a huge concession is being given to this particular company. They will set up a steel
plant at Paradeep.
SHRI ARJUN SETHI (BHADRAK): Madam, I would like to draw your kind attention to
his words. The hon. Member, while speaking, has said that 'it will facilitate … of mineral
wealth'. Will it go on record? No Government, whether the Central or State, will …
(Interruptions)
… (Interruptions)
SHRI B. MAHTAB (CUTTACK): If Shri Basu Deb Acharia is going to suggest what
should be the MoU to be entered by the Government of Orissa, let him come up with the
proposal. … (Interruptions)
SHRI BASU DEB ACHARIA : Madam, I have every right to say. If I have used any
unparliamentary words, you can expunge them. I have not used any unparliamentary
word.
SHRI BASU DEB ACHARIA : They will set up a steel plant with capacity of 12 million
tonnes and captive iron ore mines will be given to POSCO[reporter36].
They will extract 600 million tonnes of iron ore from the captive mines. The Steel
Plant will be set up after 33 months from the day of the company getting the licence. Why
such favour is being given to this particular company? They will start extracting iron ore
immediately after the issuance of licence, although the permission and approval of the
Central Government will be required in it.
Out of 600 million tonnes of iron ore, 30 per cent will be exported to Brazil as the
iron ore in Orissa has high percentage of Alumina. On the other hand, they are being
allowed to import similar quantity of iron ore from Brazil, which has lower percentage of
Alumina. Over and above 600 million tonnes, this company will be permitted to export 400
million tonnes of iron ore for their own steel plant in South Korea. It means that 600 million
tonnes per 1,000 million tonnes of iron ore this company from South Korea would get from
Orissa.
Madam, we have 18 billion tonnes of iron ore in our country, and Orissa has 4.5 billion
tonnes of iron ore. Nearly 36 MoUs were signed with various steel manufacturing
companies prior to this MoU. The total capacity for it would be about 40 million tonnes
of iron ore. What was the price at which they were permitted to purchase iron ore from
the Orissa Mineral Development Corporation at the time of signing these 36 MoUs?
They were permitted to purchase iron ore at the market price. What is the price of one
tonne of iron ore today? It is Rs. 2,000. But in the case of POSCO, the cost of extraction
or the total cost of production per tonne of iron ore would be only Rs. 400. Why is there
such a difference in it? Why this particular company is being permitted to take iron ore at
a much lower price? How much will be the loss to the State of Orissa as a result of the
lower price that has been fixed in the MoU? The loss for the Government of Orissa
would be about Rs. 1.20 crore.
Moreover, the steel plant would be set up in the Special Economic Zone (SEZ), and
it would mean that this company would enjoy concessions in income tax, excise duty, and
other taxes. How much would be the loss for the Government of Orissa on this account?
MADAM CHAIRMAN: Mr. Acharia, please be brief. I am saying this because there is
another Calling Attention to be taken up after this. Therefore, please put your question to
the hon. Minister[ak37].
SHRI BASU DEB ACHARIA : I am coming to the question, Madam.
This company first tried to have an MoU with the Government of Brazil. Brazil has
the largest deposits of iron ore. With the same conditions, which the Government of Orissa
has agreed to, the company went to Brazil. But the Government of Brazil did not agree to
those conditions. They agreed to provide iron ore at the market price. The Government of
Orissa has signed an MoU to supply iron ore at a much lower price. Madam, what will be the
benefit for the people of Orissa? A thousand acres of tribal land will be acquired. Total
employment will be only 13,000 as per the statement of the Government of Orissa.…
(Interruptions)
SHRI DHARMENDRA PRADHAN : This is totally wrong information. … (Interruptions)
MADAM CHAIRMAN : I will give time to your leader and he will have his say.
SHRI KHARABELA SWAIN : There is no tribal there. … (Interruptions)
SHRI BASU DEB ACHARIA : In the MoU, rehabilitation and resettlement of tribal people
has not been provided.
SHRI BRAHMANANDA PANDA (JAGATSINGHPUR): He has absolutely no
fundamental idea about what he is talking about.
MADAM CHAIRMAN: Shri Acharia, now there is no point. Please conclude.
SHRI B. MAHTAB : Shri Acharia had himself migrated from Orissa. He should not forget
that fact. I am just reminding him of his ancestors.
SHRI BRAHMANANDA PANDA : The learned Member should have a fundamental idea
of the point before speaking on it.
MADAM CHAIRMAN: Shri Acharia, please conclude now. There is another Member to
speak from your own party. Within two minutes, you will have to conclude.
SHRI BASU DEB ACHARIA : Madam, the Koreans are being given this iron ore despite
India not having enough iron ore reserves even to last for 50 years. Our per capita
consumption is the lowest among the developing nations; it is only 32 kgs. However, the per
capita consumption in China today is 270 kgs. This will not remain at this. Our per capita
consumption will increase. Our demand also will rise. If 30 per cent of the reserves are given
to this particular company, what will happen to the other steel manufacturing companies?
SHRI B. MAHTAB : In China?
SHRI BASU DEB ACHARIA : Already 36 MoUs have been signed. They require huge
quantities of iron ore. I would like to know from the Minister of Mines or the Minister of
Finance, whosoever replies … (Interruptions)
THE MINISTER OF FINANCE (SHRI P. CHIDAMBARAM): The Minister of Mines will
reply.
THE MINISTER OF MINES (SHRI SISH RAM OLA): I will give the reply.
MADAM CHAIRMAN: Shri Acharia, put your questions please.
SHRI BASU DEB ACHARIA : I would like to know from the hon. Minister as to
how the future requirement of our country will be met. Why such a concession has been
given to this particular company? Why POSCO was not offered market price, as has been
offered to the other 36 companies who will set up the steel plants in the State of Orissa? The
capacity will be about 40 million tonnes. Why in their case it is market rate of Rs.2000 or
Rs.3000, but in the case of POSCO it is only Rs.400?
SHRI B. MAHTAB : Who will give this answer? The Minister of Mines is not capable to
answer this question.
MADAM CHAIRMAN: He will say something. I am giving him chance. It is all right.
SHRI B. MAHTAB : This question can only be addressed to the Orissa Government. This
question has no scope to be answered by the Minister of Mines[KMR38].
Now, there is a need for mines policy. Should not there be a detailed discussion?
There should be a detailed discussion on mines policy before MoUs are signed. …
(Interruptions) Before it is exhausted, the Government of India should announce the mines
policy.
MADAM CHAIRMAN : Keep something
for your own party Member. Now, please conclude.
SHRI BHANWAR SINGH DANGAWAS (NAGAUR): According to the rules, he can be
given only 10 minutes.
MADAM CHAIRMAN: I am looking into it.
SHRI BASU DEB ACHARIA : The Minister of Mines has stated in his statement that the
Ministry of Mines will examine the proposal in detail because the Government of Orissa has
not sent the proposal for approval in accordance with law and in consultation with the
concerned Ministry. When an application is received duly forwarded by the State
Government, the views expressed by the hon. Members here in this House today will be
given due consideration. I would like to know from the Minister, in view of the widespread
criticism in the country in regard to the MoU signed by the Government of Orissa and
POSCO.. … (Interruptions)
SHRI B. MAHTAB : All newspapers supported this MoU. … (Interruptions)
SHRI BASU DEB ACHARIA : Apprehensions have been expressed here about the favour
shown to a particular company and the financial loss for the Government of Orissa as well
as the Government of India. Will the Government of India before approving this
proposal... … (Interruptions)
SHRI ARJUN SETHI : Madam Chairman, my point is.... … (Interruptions)
MADAM CHAIRMAN: You will get time.
SHRI ARJUN SETHI : My point is that whenever any subject concerning the State
Government comes before the House, the same is not allowed. … (Interruptions)
SHRI BASU DEB ACHARIA : But people are complaining...… (Interruptions)
There cannot be any conflict of interest between the development of a State and the
nation development. After all, it is all national resource and if Orissa prospers, the national
also will be benefited. It is a national prosperity. So, there cannot be any dispute about
Orissa's prosperity and the national prosperity. But the issue is that the basic national
resource is limited. We should use it judiciously and carefully taking into account particularly
our per capita steel consumption. What is the projection of demand in the perspective plan
for the coming 20 or 50 years or so when India is emerging as the fast growing economy?
Finance Ministry is always claiming that we are emerging as a very fast growing economy.
We are the fastest growing economy. … (Interruptions) Steel is the key sector. carefully
protect your legal interest, your constitutional interest and your economic interest. But what
I want to know from the Union Government is this. According to Section 5(1) of the Mines
and Mineral Development (Regulation) Act, 1957, the Union Government had given the
prior approval[R39].
On what criteria was the approval given? Did they know that there was going to be
a clause of a swap? If that clause of a swap was taken into consideration, whether the
technology concerned was also taken into consideration? It is because, the technology being
brought in our country is not the latest one… (Interruptions) I am one with the claims made
by our steel majors. I am not naming them.
SHRI B. MAHTAB : Why are you not naming them?… (Interruptions)
SHRI RUPCHAND PAL : Many of our public sector and the private sector steel majors
have stated that they are capable of providing this technology but they are not being given
equal status and there is no level-playing field. What is being given to the multinational
company, had it been given to our steel majors, they could have provided Orissa a new steel
plant with the latest technology. But it is not being done, and it is being denied to them.
(Interruptions)
(Interruptions) … *
SHRI RUPCHAND PAL : Madam, I am asking the Union Government whether there has
been a level-playing field or not.
There was a story about the high alumina content and the technology involved in the
process, what is called the Fenic Process. Does it suggest that we, in the process of our
development of the steel technology, are not at a stage where we could match the technology
and resources that are being provided by the current steel major, who badly needs our
precious underground process, which the world over is yet not planned in a judicious
manner, which is being given a go-bye by the Orissa Government and approved by the
Union Government?
I charge the Union Government whether they have applied their mind before giving
prior approval.
SHRI ARJUN SETHI : Madam, I am very much thankful to the hon. Minister of Mines for
narrating, in detail, in his statement about the MoU that has been signed recently by the
Government of Orissa with the Korean steel major, POSCO. The statement of the hon.
Minister reveals everything. It also clarifies whatever allegations or points have been raised
here. This particular MoU could be possible only because the Government of India -- the
hon. Finance Minister is present here -- have allowed 100 per cent FDI in the mining sector.
In consequence of this particular announcement, this MoU could be possible. Otherwise,
no such MoU could be possible. So, only after the policy decision of the Union
Government to allow 100 per cent FDI in the mining sector, the MoU was signed between
POSCO and the Orissa Government. Madam, the statement of the hon. Minister of Mines
specifically says: “However, the Ministry of Mines is yet to receive any proposal for grant of
prospective licence or the mining lease to M/s. POSCO through the State Government of
Orissa[k40].”
I am simply astonished that incidentally all the hon. Members are from West Bengal.
Fortunately or unfortunately, we do not pull your West Bengal. This is the history. … *
SHRI ARJUN SETHI : Madam, my point is that the Orissa Government is very much
competent, with the approval of the Central Government on policy matter, to enter into
MoUs provided those MoUs do not go against the policies of the Central Government. If
this is so, why are they so much worried? Nothing has yet been achieved. The Orissa
Government has not yet sent the proposal to the Central Government. As has been stated
here by the Government, they will look into the details. They will have consultation on
everything. Why are they still so much agitated about this particular MoU? When the
Government of India has declared that hundred per cent foreign direct investment is very
much there, why are they very much opposed to it? If there is anything - I won’t go into the
details - the Government of Orissa is competent enough to discuss that with the
Government at the Centre. At that point of time, the Central Government can decide
everything on merit. So, there is no point in saying that it has gone against the interests of
the country.… (Interruptions)
MADAM CHAIRMAN: Arjun Charanji, you know that, as a leader, if you want to ask
anything from the Union Government, you can do so by putting questions.
SHRI P. CHIDAMBARAM: If you have some questions, just put them… (Interruptions)
SHRI ARJUN SETHI : Madam, I would like to know whether the lease would be governed
by the Minerals and Metals (Regulation and Development) Act. If so, will the hon. Minister
assure the House that the Government would grant licence to the Government of Orissa as
well as the steel major when it conforms to the provisions of this particular Act?
Madam, it has been said that some amount of minerals will be exported to other
countries, that is, Korea and Brazil. It has been pointed out here and incorporated in the
MoU that swap will be permitted up to 30 per cent provided the POSCO equally imports 30
per cent of the minerals[pkp41].
Moreover, it has also been mentioned in that particular MoU that after having gone
into the details etc., if it is found that it has alumina content to the permissible limit, then
there will be no need of exporting or importing. It has been mentioned there.
Tuesday, February 19, 2008
The Telegraph - Survey finds Orissa ‘poorest’ in India
The Telegraph - Calcutta (Kolkata) | Nation | Survey finds Orissa ‘poorest’ in India
Survey finds Orissa ‘poorest’ in India - Opp. demands farmers’ loan waiver, study points to slow growth | ||
| SUBRAT DAS | ||
Bhubaneswar, Feb. 15: Tall claims of “rapid industrial growth” made by the NDA government have fallen flat with the pre-budget economic survey for 2007-08 describing Orissa to be the poorest state in India. “Orissa’s economy is still characterised by incidences of poverty,” states the survey. Quoting the recent estimate stated by the Planning Commission, the survey report states that the percentage of BPL population in Orissa stood at 39.9 per cent, compared to 21.8 per cent at the all-India level. The percentage of BPL population in rural Orissa (39.80) is lower than that in the urban belt (40.30), which is reverse at an all-India level (rural 21.80 and urban-21.70). The state could reduce poverty by 1.5 per cent during 2000-05 despite implementation of poverty alleviation schemes. However, the situation did improve in 2000-05 with a reduction percentage of 7.3. The slow rate of improvement has been attributed to several inherent problems such as vulnerability to repeated natural calamities, a disproportionately large proportion of ST/SC population, a large number of rural communities, want of adequate irrigation facilities and lack of high quality infrastructure. “Realising” that poverty is one of the factors for the backwardness, the Vision-2020 document, prepared by the government, has targeted an ambitious economic growth rate of 9 to 10 per cent by 2020. Attempts have been made in the document to target poverty reduction by promoting broad-based industrial growth. Orissa’s economy achieved an average annual rate of 7.26 per cent in the first four years of the 10th Plan primarily due to a high growth rate of 11.34 per cent in the industrial and mineral sectors. More than 45 steel companies, including Posco and ArcelorMittal, three aluminium giants and 13 power entities have signed MoUs with the state so far to set up plants in here. Despite the industrialisation drive and implementation of a number of employment generation programmes by the Centre and the state, the number of unemployed youths has been on the rise. During 2006, about 2.41 lakh job seekers registered themselves in employment exchanges. Only 586 placements were made against the 2,103 vacancies notified, read the survey report. |
Tehelka:: Free. Fair. Fearless - Riots in Kandhamal
Tehelka:: Free. Fair. Fearless
Fear still grips Orissa nearly two months after Hindu groups attacked Christians, reports BIBHUTI PATI
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| Jaganu and his wife at their home Photo: Bibhuti Pati |
The turmeric leaves have yellowed and in days shall turn brown. Mustard fields are ready to yield. Ginger is being reaped. In the next seven days Jaganu Digul will reap his turmeric and pay back the moneylender’s loan and celebrate Christmas with his family.
On December 24, Jaganu Digul took his ginger yield to the Daringbadi ‘haat’ (village weekly market), and from there to Bamunigaon haat to sell the remaining ginger. It was around 11am when a group of aggressive youth stormed in, brandishing weapons. They went about closing the haat. They belonged to the Kui community, and were backed by party workers of the Bajrang Dal, RSS and the Vishwa Hindu Parishad.
Local Christians gathered and supported the shopkeepers who were unwilling to close the haat. Heated exchanges soon took the shape of skirmishes. Soon arson and looting of shops followed. “Loot the Hindus,” someone screamed. Jagnu’s ginger got crushed in the stampede. Another group of men, shouting “Jay Bajrangbali”, set fire to a garage named “Jaga Balia”. Jaganu heard that the chapel at Bamunigan was being vandalised. He hid himself under a culvert near the police out post. Soon, the authorities clamped down, and a curfew was declared.
“I am a Christian and was looted by a Christian mob, and the Jaga Balia garage belongs to a Hindu, and was burned down by Hindus,” says Jaganu, recollecting his Christmas eve, spent in fear and hunger under the culvert. He somehow managed to get home by taking a jungle path. On seeing him, his wife broke down and said that a mob had forcibly cut the mustard crop from their field and set fire to their turmeric crop. Jaganu fainted, and on regaining consciousness, all he could do was to think of how he would repay the moneylender.
Jagnu is just one among the hundreds in places like Mansaguda, Butukia, Sindiro Gaon, Barakhama, Musukuli, Kadingia, Godapur, Khadadar and Prayati panka who suffered during the communal riots in Orissa’s Kandhamal district last December. Many are still waiting to return to their work and livelihood, and the peace that seems to them lost forever. They don’t understand the complexities of religion and caste, let alone politics.
More than a 100 churches have been destroyed in the violence and several temples vandalised. Around 600 homes and shops were set fire, including 300 houses of the Christian street of Barkhama and some Hindu areas like Aadua Sahi of Bamunigaon that were completely destroyed. More than two thousand people were affected directly, and another five thousand or more indirectly. Some relief has reached the affected, and the administration has provided tents for shelter. Yet, despite all the support given by the district administration, many are yet to recover from the trauma of the event that destroyed their life savings and took away their loved ones. More than a hundred criminal cases have been registered in Kandhamal district, and so far the police have arrested172 people. Some 600 people are still missing, and are believed to be hiding in neighboring districts.
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| Nearly two months after the attacks, some of those who fled return to their villages Photo: Bibhuti Pati |
Manish Burma, the District Collector says, “ It will take some time to normalise the situation”. According to a local social activist, “The terror is yet to recede. In Bamunigan, Daringibadi and Godapur areas the hardcore Hindus as well as Christians are holding secret meetings. The Christians of Barakhama and the Hindus of Aadua Sahi is their target this time. The government and the local administration have done their lot. Some people are politicising the matter. This is delaying in the restoration of peace and confidence among the people. Now Christian tribals are separated from their original Kui community. Thousands of school children are without books and lanteens. Their education is completely hampered.”
According to District Christian Welfare Society Secy. Manas, in Kutikia, Basakhama, Sudra, Budukia, Ribingia and Sinkiguda, Christians are being forced to convert to Hinduism by the RSS, VHP and the Bajrang Dal. But a local police officer dismissed this as baseless, “I have personally been to Dalki, Sudra, Katangi villages on receiving complaints. On asking them, they denied such things. We have not received any reports. These are rumours.”
In the Bamunigaon firing incident Tileswar Digul of Katamaha and Kundan Mantri of Alanjari village lost their lives. But their families are refusing to identify and receive their bodies in apprehension of police harassment. Day by day, Tileswar’s wife Sunita is crumbling into misery. When asked why they didn’t identify the bodies, a family member said, “ This is a Naxal area. If we identify them, then the police will take action against us as per Naxal laws.”
Interestingly, the victims of the riots across Bamunigan to Barakhama say, “We haven’t seen any Hindu of our village burning our churches or attacking us, nor did any of the Christians here attack any Hindus.” One of them, Tajuri, asked, “What was the religion of the rioters? Who were they and where from did they come? We have been celebrating Dussehra, Christmas and Diwali for years together. I go to temple because my forefathers have been going there, in the same way Elia here is going to church. What is wrong in it? So far, no radical Hindu or Christian has come with an answer to this innocent question of the people of Kandhamal.
| Tajuri’s Story Barakhama’s Tajuri, 72, is a Hindu. Alio, 51, is a Christian. Though not related by blood they are no less closer to each other than a mother and son. It was Tajuri who brought up Alio since he was orphaned in childhood. They live in one house, with a common gate and kitchen stove.Even after he got married, Alio looked after Tajuri since she is a widow. He also helped Tajuri’s daughter Minakhi to be married away, in complete Hindu rites. On December 25, as Alio was getting Tajuri her medicines before setting out for the church, he heard loud slogans outside. Shouting “Jai Sri Ram, Bom Bom Bhole, Jai Hanuman”, a mob entered Alio’s house and set it ablaze. They beat up Alio and his Ukia severely. Half-blind Tajuri rushed out, asking them why they were beating her son. The mob turned on her, and showering her with abuse, said, ‘You are a Hindu but you call a Christian your son?’ And then they beat her up. One of them said, “Set fire to her house!” the house was burnt down within minutes. Tajuri and Alio still break down when they recall the terror that visited them that day. |
Posted on February 15, 2008
Asia's top 3 steelmakers agree 65 pct rise in iron ore prces with Vale UPDATE - Metals News - Metals Place
Asia's top 3 steelmakers agree 65 pct rise in iron ore prces with Vale UPDATE - Metals News - Metals Place
18 February 2008
18 February 2008
Asia's top 3 steelmakers agree 65 pct rise in iron ore prces with Vale UPDATE
Asia's three-biggest steelmakers have agreed to a 65 pct increase in iron ore prices following negotiations with Brazil's Vale, the world's biggest iron ore producer, in a move likely to set the global benchmark for the raw material.
JFE Holdings, Nippon Steel and Posco have agreed to pay 78.88 usd a ton for iron ore starting from April 1, also heralding an increase in steel prices.
BHP Billiton and Rio Tinto, the world's second- and third-largest producers, are expected to follow suit. A spokesman for BHP declined to comment on the negotiations, while Rio Tinto could not immediately be reached for comment.
Steelmakers agreed last year to a 9.5 pct increase in iron ore prices but since then spot prices have jumped about 150 pct as demand has soared, leading the market to expect an increase of about 60 pct in the contract price this year. A 65 pct jump is the second biggest rise after 2005's 71 pct spike.
Demand for iron ore, a key material in steel, has soared due to growing demand led by a construction boom in China and India.
Steelmakers also face increasing costs for coal and coke.
Ko Min-Jin, a spokeswoman for Posco, said the group will consider raising prices of its products after completing negotiations with other miners.
Katsuaki Watanabe, president of Toyota Motor Corp, said Japan's top-ranked automaker had no immediate plans to raise car prices.
At 9.25 am, shares in Rio Tinto were up 74 pence, or 1.4 pct, at 5,567 pence, while BHP was up 24p, or 1.6 pct, at 1,575p. – Thomson Financial
Sunday, February 17, 2008
WSJ - Feb 12: Coal prices Surge $20 in 2003 to $120 in 2008
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China is doing for coal what it once did for oil: pushing prices to new highs, adding more pressure to the creaking global economy.
China has long been a huge supplier of coal to itself and the rest of the world. But in the first half of last year, it imported more than it exported for the first time, setting off a near-doubling of most coal prices around the world. The capper came in late January when a winter of punishing snowstorms and power shortages led Beijing to suspend coal exports for at least two months.
Just since then, Asian prices have shot up an additional 34%. Last week, coal benchmarks hit all-time highs in the U.S., Europe and Asia. That's adding to worries over global inflation already stoked by rising prices for everything from crude oil to cattle feed. "The velocity of the change has been remarkable," says Thomas Hoffman, senior vice president for external affairs for U.S.-based coal supplier Consol Energy Inc., which he says is considering holding off on some commitments to supply coal to see if prices rise even further.
For the world, which uses coal for about 40% of its electricity, the result is similar to what happened after China became a net importer of oil in 1993. But the Chinese factor is unfolding much faster with coal. It wasn't until China's industrial development shifted into overdrive this decade that the nation began to shake global petroleum markets. Oil's big price surge came after widespread brownouts in China in 2004 forced factories there to buy diesel fuel for backup generators, increasing the country's foreign oil demand.
China's need for coal is rising as other factors around the world are putting severe strain on supply for the fossil fuel. Flooding at major mines in Australia since mid-January has dramatically stunted that major coal producer's exports to Asian markets. For more than a year, meanwhile, Australia's overloaded ports have been choked with cargo vessels, forcing ships to wait in long lines to dock and get their coal. Power shortages and blackouts in South Africa amid rising demand there have curtailed exports to Europe. In Russia, another major coal producer, rail-car shortages have frustrated attempts to meet growing world demand.
Demand is rising quickly elsewhere. Japan, one of the world's biggest importers, is burning even more coal since an earthquake damaged a nuclear reactor last year, doubling one utility's coal intake. Longer-term pressure comes from India, which has mounted a major expansion of coal-fired electricity plants that is driving up the country's coal imports despite its large domestic reserves. Indonesia has been moving over the past year or so to divert more of its coal stores to domestic use, as the coal industry there has been depleting its higher-quality coal reserves.
Even U.S. coal producers are ramping up exports to Europe, as buyers who for years were uninterested in American coal now are scrounging for supply. "There's a butterfly effect," with issues inside China pushing up demand and prices for the fuel from other coal-producing nations, says Vic Svec, a senior executive at Peabody Energy Corp., the world's largest private-sector coal producer, based in St. Louis. "Demand from Beijing can ripple back to Queensland, Australia, or Gillette, Wyoming."
The China-driven coal boom has pushed up wages and created more jobs for U.S. miners as well as port and rail workers -- a twist on recent trends moving industrial jobs from the U.S. to China. "We've as an industry never seen such a dramatic . . . upturn in the market that seems to have such extended strength," Bennett Hatfield, chief executive of International Coal Group Inc., another U.S. coal producer, said Thursday in a call with analysts. Consol Energy said exports from its Baltimore terminal rose 20% last year and it expects a 25% jump this year.
Thermal coal prices at Australia's Newcastle port, an Asian price benchmark, finished at $125 a metric ton Monday, according to the globalCOAL international trading platform. That was up 34% since Jan. 25 and up 143% from January 2007.
On Monday, Central Appalachian coal futures on the New York Mercantile Exchange for delivery in March stood at $78.25 per U.S. ton. That's double its price at the start of 2007 despite weak domestic demand and above-average stockpiles due to a mild U.S. winter.
Some experts say coal prices could remain high or even keep climbing through 2009 or beyond, weighing on the already-slowing world economy. Even though coal is a leading source of atmosphere-warming greenhouse gases, its share of the world's energy diet is increasing -- which could help keep its price up in a recession. Although the use of cleaner-burning alternative fuels is on the rise, fast-growing energy consumption is expected to underpin coal demand. Still a relatively cheap -- and abundant -- alternative to oil, coal is sought in rapidly industrializing nations such as Brazil, India and Vietnam as well as China.
The demand for steel in developing countries has put coking coal used for steel at historic highs, as well as the thermal coal used for power. New coal-fired electric plants under construction in the U.S. also should add 50 million tons of new coal demand a year, about a 5% increase above current demand, say natural-resources portfolio managers at U.S. Global Investors.
To be sure, some of the factors boosting coal's price are temporary. China's worst snowstorms in 50 years have both increased demand and hampered delivery from coal mines in northern China to power plants across its southern and western regions. China has been methodically closing down thousands of unsafe and inefficient coal mines, restricting supply until enough new or refurbished mines can be opened. And Chinese regulations have contributed to shortages. China has freed domestic coal prices to rise with demand, but has capped electricity tariffs. That led power plants to order less coal -- leaving them short of coal when the storms hit.
But it's unclear how long Beijing could take to reopen more mines or correct its market imbalances. And other factors driving up prices aren't likely to change soon.
Chinese coal demand grew nearly 9% last year, raising its share to a quarter of the world's consumption. Its coal industry roughly doubled output from 2001 to 2006, but that growth slowed to about 6% last year, not enough to keep pace with demand. Five years ago, China exported 83 million more metric tons of coal than it took in. Last year, that surplus had fallen to two million. The rapid loss of more than 80 million tons in exports amounts to about 12% of the internationally traded market.
This year will be worse, predicts Gerard Burg, minerals and energy economist at National Australia Bank, who calculates China will become a net importer of 15 million tons. The International Energy Agency forecasts the gap will continue to widen: Unless China changes its energy mix, the agency predicts, it will be a net importer of 66 million tons of so-called coal equivalent, an energy measurement that equates to 95 million metric tons.
Coal was assumed by many in the energy industry to be immune to worries about the stability of supply that have helped push oil to record highs. Coal reserves are more evenly distributed around the world, and most of the world's coal is consumed where it's mined. Coal prices enjoyed a bull run in 2004 and 2005, but today's prices are higher and are causing more concern, as the possibility of a global recession looms and oil trades at around $90 per barrel.
Coal reserves still are relatively plentiful world-wide. But expanding the infrastructure to mine and transport them in developing countries is slow and expensive -- and those countries' consumption is rising at least as fast their output. India ramped up production by a third from the late 1990s to 2005, according to the BP Statistical Review of World Energy, while its consumption increased by roughly 40%. Russia plans to double its coal consumption, says U.S. Global, in part to free up natural gas for lucrative export to Europe.
As recently as 2003, China was a critical coal supplier to many Asian neighbors such as Japan, which relies on China for 10% of its coal. But around that time, China's economic expansion began to accelerate sharply, especially in heavy industries that guzzle electricity, including auto making, steel and chemicals. Coal exports began to dwindle and imports rose.
Beijing began closing coal mines in 2005 to address a horrific safety record. Energy-security experts still expected its exports to increase. But China also was adding hundreds of new coal-fired power stations -- enough to power all of Australia in 2006 and again in 2007 -- even while closing older, inefficient ones. According to the China Electricity Council, China's power-generating capacity rose by 18% just from last July to December, most of it fueled by coal.
In northern China's coal belt, there were massive expansions on key rail lines to keep the supply flowing. But by mid-December last year, cracks in the coal-supply chain started to appear as the country entered the winter heating season. On Dec. 11, the huge city of Chongqing announced it would ration electricity for the first time during winter. Government officials said overworked generators were breaking down, and there was a shortage of coal.
By early January, the government said it had closed 10,412 coal mines and still planned to close 1,100 more. Meanwhile, coal miners and buyers were preparing for contract negotiations. Coal prices, freed from government control two years earlier, were steadily rising. But the government was keeping caps on electricity rates to hold down inflation, at an 11-year-high. Power producers started lobbying for higher tariffs. They began shutting down some plants because they were unprofitable to run -- and let their coal stockpiles run down to just 10 days' supply, according to the Ministry of Railways.
On Jan. 10, the worst blizzards in decades started to pummel a huge swath of central and southern China, leading to heating shortages. The vice governor of one of China's most economically important provinces, Guangdong, publicly chastised power operators for chasing excessive profits.
A day later, Xiao Peng, the vice general manager of China Southern Power Grid, said the region had shut down 6% of its power-generating capacity because of a shortage in coal -- the worst electricity shortage in five years. Other provinces reported power plants had stopped providing electricity because they couldn't afford coal supplies, until ordered back online. Later in the month came the ban on coal exports.
The coal shortage has rippled through other commodity markets, hurting China's output of steel, copper, zinc and aluminum as electricity is being diverted for domestic industry and household heat and electricity. China's largest copper producer, Jiangxi Copper Co., shut down some plants, contributing to higher U.S. copper futures. Jim Thompson, editor of Coal & Energy, a daily market newsletter on the coal industry, said if global coal prices remain high, it's possible that utilities in the U.S. and Europe could run low on fuel too.
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Ellen Zhu in Shanghai contributed to this article.
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