Ramesh says miners must set up industry in state; ministry says no

In a communique to the mines ministry ahead of the Group of Ministers (GoM) meeting on July 22 to be chaired by Finance Minister Pranab Mukherjee,Ramesh had said “to enable states to leverage their mineral resources in their domain for their industrial development,there should be a proviso allowing states to restrict bidding to only those firms that will set up industry there.” But the mines ministry in its reply vigorously countered that,saying “across the world mining is a separate economic activity and the ore is traded rather than being merely used for captive purposes. This is also desirable because captive miners use resources sub-optimally,taking only that part of the run-of-mine production which is suitable to metal making as per their installed processes.”

The mines ministry also reminded Ramesh that the Hoda Committee too had advocated the evolution of mining as a separate industry since it enabled a clear break from “the peculiar historical evolution in the Indian mining sector” where metal producers were allotted captive mines.

Arguing that whether or not an end-use industry was set up in the same state where a mine was located was a purely economic decision,the ministry said since mineral ores were a bulky commodity,normally an entrepreneur would like to set up his unit in proximity to the mine. Listing out the possible reasons why an investor would shy away from investing in a particular state,the ministry said it could happen due to non-availability of land,high requirement of power and coal and lack of local infrastructure. “Clearly the state governments must address these issues upfront either by remedying the situation or by providing suitable concessions. Forcing an entrepreneur to make decisions on the location of an end-use industry in the mining area on non-economic grounds may not only distort pricing of the product but also make it lose its global competitive edge,” the mines ministry pointed out.

Responding to another suggestion by Ramesh that the proviso of allowing competitive bidding without any application backlog be removed and concessions be granted through a bidding process,the ministry said it would not be fair to wipe out mining lease applications made by investors who have carried out prospecting operations under a prospecting licence and were assured a seamless transition on the basis of which they invested.