Steel, along with textiles, has played a pioneering role in modern India's industrialisation and it is not surprising that the policy to be adopted on the industry's major raw material, iron ore, has become the focus of national attention. The country has been exporting iron ore for decades, including by the largest miner and exporter the public sector National Mineral Development Corporation. These exports have been predominantly to Japan but in recent years they have gone to China also. The total export of iron ore touched Rs.13,650 crore in 2004-05. Historically, the policy on iron ore export has been conditioned by the limited domestic demand. However, India's demand for steel is expected to pick up on a long-term trend in view of the expansion of infrastructure, which involves construction, besides demand from the expanding automobile industry. Iron ore reserves, estimated to be 23.6 billion tonnes, may seem enough at the current level of consumption. However, they do not look all that comfortable when viewed against the long-term requirements, with per capita consumption of steel rising towards international levels. Under the circumstances, a re-look at iron export policy becomes necessary. An outright ban will not only be too drastic; it will also violate international trade rules, which bar quantitative restrictions (QRs) except in specific circumstances. Public policy should aim at discouraging iron export through such measures as the imposition of a duty on export of iron ore, so that investment in value addition by way of steel plants and manufacture of special steels is encouraged.
A parallel can be found in long-term policy on the leather industry. India has become a major producer and exporter of value-added leather products, including footwear, thanks largely to a ban over nearly three decades on the export of raw hides and skins and semi-finished leather. The ban has been substituted by an export duty following the abolition of QRs under World Trade Organisation norms. The Union Government would do well to adopt a similar approach in the case of iron ore. This must allow export of ores of quality that cannot be used within the country for technical reasons. It must also be sympathetic to the dependence of a large workforce, especially in Orissa, Madhya Pradesh and Goa, on iron ore export. The eastern region, in particular, has been a victim of the old policy of freight equalisation, which meant that West Bengal, Bihar, and Orissa were artificially denied the comparative advantage of proximity to mineral resources. Post-1991, freight equalisation has been abolished. The eastern States will be able to get their due if they are assisted in accessing raw material for value-added production. As for international producers, nothing bars them from setting up steel plants in India and catering to what by all accounts will be a growing market.