Published On: Tue, Jul 26th, 2016

Can Mr. Piyush Goyal be the saviour for POSCO and Vedanta in Odisha

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goyalBy Rasananda Panda 

In a recent (30th June, 2016) review meeting on status  of the mining sector in the state, Mr. Balvinder Kumar, Union Mines Secretary urged the state government to take all the necessary steps towards putting more mines into auction. Even more than a year after the amended  Mines and Minerals (Development and Regulation) MMDR  Act, 1957 came into force, the state has auctioned only one iron ore block in Ghorhaburhani-Sagasahi located in Koira sector in Sundargarh district. Essar Steel emerged as the successful bidder in the first iron ore block offered for e-auctions in Odisha. A robust bidding helped the steel maker to bag the block, upstaging strong contenders like Tata Steel, Jindal Steel & Power Ltd (JSPL) and JSW Steel. However, in the current financial year till date no mines from state has been put on auctions. This has become all the more important given the fact that a large chunk of the Rs. 8.8 lakh crores worth of investment that Naveen Patnailk government  had attracted over the years is in uncertain territory.  As a result, only 28 percent of the proposed investment i.e around Rs. 2.5 lakh crores has actually been implemented on the ground over the past decade or so. The problem gets compounded when projects of international players such as POSCO, ArecelorMittal, Vedanta are in limbo owing to the uncertainty as regards to access of raw materials especially mineral resources. The net result is  the fall in contribution of mining to state’s Gross State domestic product(GSDP) which was around 8% at the end of 2011-12 to close to 5% by the year 2015-16. The problem gets further aggravated as the state’s economy is largely based on mineral resources and this fall in mining sector’s contribution has further reduced the contribution of manufacturing sector to GSDP of the state which is around 17% now, down from 19% in 2011-12. Needless to say, this has its negative effect on state’s revenue collection. In addition,  the sector is full of issues pertaining to corruption, nepotism and other forms of irregularities. Of course these are  not issues only in Odisha but across the country that made  Supreme Court to abandon all the mining allotments and ask for fresh allotments . The subsequent amendments to MMDR Act, 1957 took away the right of the state to recommend mining leases and made it mandatory for everyone to go through the auction route for mining lease.   Here enters Mr. Piyush Goyal – the star performer in Modi’s Cabinet – the Union Minister (Independent Charge) for Coal, Power, New and Renewable Energy and now with Mines as a reward for his efficiency in handling the earlier three crucial portfolios (Coal, Power, New and Renewable  Energy). He ranked number one among all the ministers in the poll conducted through My Gov portal.  His penchant towards e- auctioning of coal mines across the country including in Odisha and the fairest allotment of coal mines to power sectors in shortest possible time have not only made  the Coal India Limited a cash rich company in recent years but also made the power company both in public  and private sector to recover from near shut down position owing to lack of coals in their inventory. Most of these power producing companies are showing a upward  trend in their share prices after a long time.  Add to this, his effort towards power saving through LED bulb distribution which is directly monitored by PMO is noteworthy. In addition, his efforts towards new and renewable sources of energy especially towards solar energy is praise worthy. Now with the ministry of mines in his kitty it is expected that his performance will reach new heights given the synergy between coal, power and mines. It is a different matter that these ministries were handled by half a dozen ministers in the previous UPA regime but to no anvil given the situation in which all these ministries were during the period 2009-14 and especially during 2011-14- in the back drop of coal scam, mining scam and the power companies not having coal for 10 days of operation of their plant. In a way, all these ministries are of high importance towards the rapid growth of the economy as all these ministries deal with the crucial infrastructure sector having maximum linkages to other sectors of the economy. it is expected that inter ministerial dispute among these ministries shall be reduced to minimum with the Minister himself being the presiding officer in case of such necessities. It seems the government is mulling a move towards combining the coal and mines ministry together for maximum efficiency. Mr. Goyal while assuming the charge of this ministry from his predecessor Mr. Narendra Singh Tomar  has already set a target for himself in increasing the contribution of mining sector to India’s GDP from present 2.4 percent to 3.4 percent in next 2-3 years. What further makes Mr. Goyal endear to all, is his believe in cooperative federalism. His affable nature of indulging in discussion with officials both from the centre and states, giving due credit and appreciation to bureaucrats in his ministries and most importantly his rapport with the state Chief Ministers -including Mr. Patnaik. Under graduate economics students in Odisha are used to a statement “Odisha is a rich state inhabited by poor people”. The statement derives its significance form the fact that the state has country’s 60% bauxite, 33% iron ore, 25% coal, and 98% chromites –  the minerals that are the key drivers of economic growth in recent times. But as it is, state economy had long languished as a backward state with a per capita income of Rs.55116 which is 71%of the national average. Industrial development in the state was low during 1980s and  mid 90s except for handful of PSUs like NALCO, HAL, Rourkela Steel Plant (SAIL). The state did not have large private industries till the boom in metal and minerals sector after the liberalisation and at the turn of the century. The beginning of this century saw a  promising and no non sense leader in the form of Mr. Naveen Patnaik and with it came  the wave of industrialisation in the form of companies like Tata Steel, Vedanta, Hindalco, Aditya Aluminium, POSCO, Jindal Steel and Power, Bhushan, ESSAR being interested in investing in the state. Therefore, it is high time now for the state government to act in coordination with centre to fast track the mining auctions. It appears from the review of the Union Secretary of mines that the state government was unable to grant G-2 (general exploration indicating presence of resources) status to mining blocks  from their existing G-3 (preliminary exploration) that are a requirement before putting the mines for auction. The state needs to facilitate the mining blocks with the necessary infrastructural requirements at the site. Utmost care should be taken towards rehabilitation and resettlement (R &R) of the displaced people from the affected area. After all the state is being credited for having the best R & R policy in the country. However, the silver lining is that the state government is ready with the details of 8 mines to be auctioned sometimes in September. Out of these eight mines, there are six iron ore, and one each in limestone and bauxite.  In addition there is pressure on the state government to enhance the production of bauxite to meet the demand of aluminium companies across the globe. With District Mineral Foundation working as a watch dog for all mining activities in the district and to be more specific at grass root level in the site to avoid situations like Niyamgiri and  Kalinganagar, it is desirable for the state government to fast track the mining sector in the state so as to take the benefit of a proactive and professional Minister in the form of Mr. Goyal. After all  the benefit of the state at large lies in  enhancing the contribution of this  sector to GSDP to around 8-10% in the next three to five years which in turn  will increase the share of manufacturing sector to GSDP. And who knows the fate of POSCO and Vedanta may take another turn and making the state a prime destination for mines and mineral based industries. Nevertheless this will compliment the state government’s Industrial Policy  Resolution – 2015 where the emphasis is being given towards diversifying the industrial base of the state by identifying priority areas for investment.

Professor Rasananda Panda Professor of Economics, MICA, Ahmedabad. Email: The author acknowledges the research assistance provided by Mr. Mitrajit Biswas, Fellow Program in Management (FPM) Student, MICA.

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