Mining ban will cripple economy

Although the Supreme Court has subsequently restored the right to public sector NMDC to continue operations, its imposition of a ban on iron ore mining in the Bellary district of Karnataka was in the nature of an extreme step. It was meant to demonstrate the Court's anger and disappointment at the gross violation of rules and environment laws by miners in the Bellary region, and show the Court's resolve to bring these rapacious and illegal operators to book

ECONOMIC IMPACT

The economic loss from a continuing ban on private sector units can be enormous and aggravate the slowdown that has already gripped the economy. Nearly 21 million tonnes of steel-making capacity, located in Karnataka, is dependent on local iron ore supplies. Of the total production in Karnataka, which provides 24 per cent of country's iron ore output, 75 per cent comes from the Bellary-Hospet region.

Shutting down the Bellary mines will force a closure of the steel plants located in Karnataka as they can neither use the low-grade ore from Goa nor bring in the required quantities from Jharkhand and Chhattisgarh, as the high transport costs make that commercially unviable.

The closure of Karnataka steel plants will result in huge commercial losses to these companies, but the far bigger impact will be on the loss of production and employment in downstream industries such as automobiles, consumer durables, machine tools and engineering products. The direct employment loss would itself be about 80,000, with several lakh other jobs being jeopardised in downstream industries.

The government stands to lose Rs 10,000 crore in revenues and commercial banks could suffer an asset deterioration of up to Rs. 50,000 crore.

Even after excluding other relatively lesser losses to the Railways, state government and utilities, the negative economic impact of a continued ban on mining in Bellary may be just too large for the economy to absorb at this stage, when investors' sentiment is already frail and global conditions are uncertain. The ban, if continued, will bring the Indian economy to the edge of the avoidable precipice.

In imposing the ban, the Supreme Court is presumably acting on the basis of its past experience. The Court saved Delhi from choking to death from noxious transport exhaust fumes by insisting on a cut-off date for the introduction of CNG in public transport vehicles. This created a mini-crisis with Delhi's transport system grinding to a halt for a few weeks. The necessary executive action then followed. The Court, therefore, realises that in India, we follow the practice of ‘management by crisis!'

Far from acting in anticipation of emerging situations, howsoever clearly visible, action is postponed until time has virtually run out— creating avoidable pressures and incurring unnecessary costs.

But given the predominant culture of management by crisis, the Court, acting on practical logic, has again decided to create a crisis— one which is far larger in its coverage and impact than stopping the Delhi public transport in its tracks.

Executive action will hopefully follow. Can we really afford such repeated crises, which seem to be a necessary condition for generating the required policy response and action?

MINING WITH REGULATION

The impending crisis will extend to all mining, including iron ore, coal, bauxite, copper and other minerals. Business as usual will result in foregoing the use of our very large reserves of these natural resources that are essential for industrialisation and growth.

A very large part of these reserves lie either under forest cover or under lands populated by indigenous people. All these will be out of bounds for commercial mining, which is dominated by rapacious miners who are continually thwarted by social pressure and judicial action.

Such an outcome will be disastrous. We will then have to import massive volumes of these minerals, putting unsustainable pressure on our balance of payments, rendering our industries uncompetitive and generating a massive loss of employment. The Court would do well to put together a group of relevant experts and industry personnel to find a way out of this impending disaster and save the country from disaster.

Two suggestions can be made here for a possible way forward. One, to immediately establish three technically competent and independent regulators, one each for iron ore, coal and other minerals, respectively. These regulators, by drawing up the necessary regulations and enforcing them strictly, will de-politicise the sector and minimise violations of environment laws and rights of the tribal people.

Second, the government has to ensure that its policy framework attracts large, organised, technologically well-equipped and socially and environmentally conscious mining companies.

These are more susceptible to public pressure and less prone to corrupt and illegal ways of operating a business. There are some elements in the draft mining law, as it exists today, which could have the opposite effect of driving out the large and organised miners from the sector and encourage those who are rapacious, only want to scour the land, ride roughshod over peoples' rights and have zero concern for the environment.

This would only result in India being unable to take advantage of its own natural resources. This will indeed be a case of denying ourselves the natural advantage simply because we are unable to jettison our culture of managing by crisis.

(The author is Secretary-General, Ficci. >blfeedback@thehindu.co.in )