News

India to sell illicit iron ore.

Issued at 2011-09-13



INDIA is about to begin the auction of 25 million tonnes of illegally produced iron ore impounded from private companies.

The auctions that start tomorrow are aimed at calming the world's metal markets amid concern that a six- week-old ban on mining in Karnataka, the country's second-biggest iron ore-producing state, is pushing up prices and squeezing supplies to steelmakers.

On average 1.5 million tonnes of iron ore will be sold each month through electronic auctions, with the government keeping 10 per cent of the proceeds in royalties, the Metal Scrap Trade Corporation, which is overseeing the sale, said.

The move is a relief for steelmakers. JSW Steel, for example, is close to running out of iron ore supplies for some of its plants, including Vijayanagar, because of the ban.

The Supreme Court imposed a total ban on mining in Bellary, a mineral-rich district of Karnataka, on July 29, two days after the state's chief minister had been accused of accepting bribes from companies accused of mining illegally in the region.

Mining in two other areas of the state was banned a few weeks later, when other arrests were made.

India is the third-largest producer of iron ore after Australia and Brazil but the industry is under close scrutiny after a government report exposed a culture of corruption and kickbacks, dominated by a handful of wealthy businessmen and politicians.

Miners are accused of extracting and selling iron ore without a proper licence and of ignoring environmental rules, depriving the government of billions of dollars in taxes.

The ban has also affected Vedanta, a FTSE 100-listed India-focused mining group, which operates a mine in Chitradurga, one of the regions where all mining has been suspended.

The mining scandal in Karnataka dates back to the 1990s, when India sought to liberalise its mining industry by opening it up to private companies.

Rising prices and a string of deals between corrupt officials and businessmen led to the creation of a de facto mining mafia.

The sudden halt to mining operations in the south of the country is now affecting the wider economy.

Figures from the Federation of Indian Mineral Industries showed overall exports of iron ore from India fell 23 per cent in July to 3.62 million tonnes, from 4.68 million tonnes last year.

 


Source: The Australian



Related News