Goa's iron ore produce is largely of lower variety catering mostly to China. Since China itself is reeling under economic slowdown, there can't be drastic impact on India's exports, says SBI economist Soumya Kanti Ghosh.
State government and regulatory nods will delay mining resumption
Soumya Kanti Ghosh
Chief Economic Advisor
SBI
Due to the ban on mining activity, India's iron ore production fell from 219MT in FY10 to 140MT in FY13 and exports declined from 101.5MT to 18.1MT in the same period. Between April 2012 and January 2013, iron ore exports fell 68.27 percent to 16.35 million tonnes year-in-year. Though the Supreme Court has conditionally lifted the ban in Goa , economists see only a marginal impact on iron ore exports. This is so because Goa contributes a small portion of the nation's iron ore manufacturing.
Speaking to CNBC-TV18's Latha Venkatesh and Ekta Batra, Soumya Kanti Ghosh, Chief Economic Adviser, SBI says Goa's iron ore produce is largely of lower variety catering mostly to China. Since China itself is reeling under economic slowdown, there can't be drastic impact on India's exports. He says in 2009-10, India's total iron ore exports to China was more than 50%, which progressively declined. "It will be 5-10 percent this year." He continues to see weak IIP for India for the coming quarters.
Ghosh says, besides Supreme Court, the industry also need clearances from Ministry of Environment and Forests and state government. The Environment ministry will notify eco-sensitive zones around national parks and wildlife sanctuaries within six months of the Supreme Court's order. The sheer impact of all other riders will make resumption of mining a challenge in 2014.
Below is the edited transcript of the interview to CNBC-TV18.
Ekta: What is your view, do you expect any sort of formidable impact on the exports eventually because of the resumption in Goa?
A: In 2009-2010 when we were in the hay days of the iron ore export and we had a huge demand from the China, the total iron ore exports to China was more than 50 percent. So whatever India was exporting to China, the iron ore export was more than 50 percent. It has progressively declined since then and this year we believe that at the current date it will be less than 10 percent. So it could be between 5 percent and 10 percent. That is the first point.
Second point is that if you look at the ratio also, from a high of around 6 billion in 2009-2010 this year it should be close to 1-1.5 billion at the same level last year. if we just juxtapose the numbers of February and do it till March. So at that level, I think it will be significantly lower than the total percentage of around 3.5 percent and it could be even less than 1-1.5 percent this year.
The other thing which has been done is that yesterday the SC has lifted the ban but there are also a couple of other things which have to be lifted. For example, there has to be a clearance from the ministry of environment then there is also a clearance from the state government and also the cap of 20 million tonne, which I believe is less than half of what Goa produces. Remember that whatever Goa produces is of the lower variety which caters mostly to the Chinese markets. Now that the Chinese economy is going through a slowdown even if you were to assume that there is no lag effect immediately translated into an iron ore export from India, that may not also happen because Chinese demand is also significantly weak at this point of time. So all in all, it is a positive thing but I think that even if you assume that all other things are positive simply because of the external factors, it will take a while for iron ore exports to pick up from India.
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