Govt to split Chiria mines, SAIL gets half

Putting an end to the fierce scramble for India's iron ore resources, the government has decided to split the Chiria iron ore mines in Jharkhand into two and give at least half the reserves to Steel Authority of India Ltd for its expansion plans. The other half will be kept for development by the private sector later, said informed sources.

Chiria's reserves are estimated at 2 billion tonnes and could go up to as much as 3 billion tonnes.This decision was taken on Monday at a meeting attended by the Jharkhand Chief Secretary A K Basu, senior steel ministry officials, Secretary Mines Santha Sheela Nair, and SAIL Chairman S K Roongta.

Asked about the decision, Steel Secretary P K Rastogi said, "The meeting was called to sort out issues related to Chiria mines. There are positive developments from the meeting."  

The decision may come as a blow to the plans of world's largest steel producer Arcelor Mittal, which had virtually threatened to withdraw from the state if it was not given resources from Chiria. Leveraging President's Rule in Jharkhand currently, the government has opted to settle the mining lease in favour of the public sector steel behemoth.

Government sources say the state government took the decision in favour of SAIL because the world's largest producer had not made much headway in the project. With this decision, the competition among the private companies such as Arcelor Mittal and Jindals will turn more intense. Mittal had been seeking 600 million tonnes reserves for his Jharkhand plans.

Also, the iron ore mining and steel production landscape in India is likely to change qualitatively. A planned capacity expansion by the Tatas in Chhattisgarh and Orissa has already run into land acquisition problems. The Jindal group which was to set up plants in Orissa and West Bengal is also learnt to be going slow on the project. So the government says the clash of the domestic steel titans might just be beginning now.

However,  SAIL may be unhappy from this development since the company had been seeking control of 2 billion tonnes of reserve. It already has steel-making capacity in Bokaro in Jharkhand. SAIL had earlier expressed its intention to set up a new unit in Jharkhand provided it gets control of Chiria. SAIL has plans to expand capacity to 23 million tonnes from the current 14 million tonnes by 2012. Control over Chiria is vital to current and future expansion plans.

In the previous United Progressive Alliance government, then Steel Minister Ramvilas Paswan had sought allocating the explored 2 billion tonne reserves to SAIL and leaving the unexplored reserves for private players. However, the proposal did not materialise.

The Mittal group will now have to weigh its options in India. In Orissa a proposed 12-million tonne steel plant is mired in land acquisition disputes. The 12 million tonne plant in Jharkhand was its big white hope. On Monday, Mittal told the Financial Times that it might relocate both plants elsewhere if land acquisition problems weren't resolved soon.

This statement was widely interpreted to mean that the world's largest steelmaker would quit India although L N Mittal asserted that "ArcelorMittal has no plans to quit India. India is an important country for steel demand growth and is an important part of ArcelorMittal's long-term strategic plans.