* Modi plans to focus on value-addition, promote steelmaking
* Iron ore exports could be stifled to preserve raw material
* Likely gainers: Kalyani Steels and JSW Steel
* Likely losers: Sesa Sterlite and Essel Mining
By Krishna N Das
NEW DELHI, May 9 When Indian prime ministerial
hopeful Narendra Modi asked at an election rally if anyone knew
of a country that exported wheat but imported bread, steelmakers
joined his followers to cheer.
For steel executives, it was just what they wanted to hear:
their calls to restrict exports of iron ore further will be met
if Modi's opposition Bharatiya Janata Party (BJP) wins the
While the move would mean a captive supply of iron ore for
steelmakers, it would further dim the prospect of Indian iron
ore returning in a big way to the world market. A steep drop in
Indian shipments in the past two years has given Australia and
Brazilian miners a bigger share of top market China.
"The government in Delhi is such that it exports iron ore
but imports steel," Modi said at the rally in the steel city of
Jamshedpur last month. "If you run your business like this, how
will the country's steel industry survive?"
One of Modi's main election planks is to crank up
manufacturing to create millions of jobs by focusing on
exporting steel, not iron ore; textiles not cotton. Results of
the five-week election are due on May 16.
The gainers of any move to discourage iron ore exports would
be steel makers that do not have captive mines and buy ores,
such as Kalyani Steels, JSW Steel and
Kirloskar Ferrous Industries, as well as international
miners such as Rio Tinto and BHP Billiton.
Iron ore exporters such as Sesa Sterlite and Essel
Mining, a unit of conglomerate Aditya Birla Group, could lose
out. Mining bans in Goa and Karnataka have already taken a toll
on Sesa, which operates in both states.
GRAPHIC-India's iron ore output/exports
TIMELINE-India's moves to curb iron ore
The BJP will also consider incentives for steelmakers as
part of its push to promote value-addition, said Narendra
Taneja, part of the party's central economic group.
Steel imports have seen double-digit percentage growth in
recent years, mainly from countries such as Japan, South Korea
and China, despite a target to raise steel capacity to 142
million tonnes by 2017 and 300 million by 2025, from about 90
Imports rose 15 percent to a record 7.87 million tonnes,
worth $6 billion, in the year ended March 2013, government data
shows, as mills ran below capacity due to shortages of iron ore.
The deficit has been created by a court clampdown on illegal
mining, before which India was the third-largest exporter with
shipments at a high of about 117 million tonnes in 2009-2010.
It has now slipped to tenth, with exports estimated at less
than 20 million tonnes last fiscal year but expected to go up as
some bans have been lifted.
India has levied a 30 percent tax on exports of iron ore
fines and lumps since December 2011, and in January imposed a 5
percent duty on overseas sales of iron ore pellets.
But steelmakers say more steps are needed to keep iron ore
prices in check and help raise the competitiveness of Indian
steel so that they can export more or at least resist imports.
RAW VS PROCESSED?
Taneja said that, if elected, the BJP "will go for a policy
shift in the direction of value-added products when it comes to
iron ore or other natural resources", but added that it was too
early to talk about export duty structures.
"Only exports of value-added products should be allowed and
by value addition at least it should go up to manufacturing of
(semi-finished metals) blooms or billets," said RK Goyal,
managing director of Kalyani Steels. "The moment there is more
clarity on iron ore, even we will expand."
But Aniruddha Joshi, a vice president at Sesa, India's top
private miner, said that given the country's vast iron ore
reserves and its potential to increase further, the best path
would be to push for more exploration instead of stifling
exports of the commodity. Sesa is controlled by billionaire Anil
Agarwal's Vedanta Resources.
AS Firoz, chief economist with a division of the steel
ministry, said the government was aware of the need to conserve
iron ore and cited export duties and higher railway freight
costs as steps taken to discourage exports.
He said, however, a blanket ban on iron ore exports was
difficult as many traders and companies survived solely on the
proceed, a view echoed by some traders who said the country
needed the foreign exchange to pay for huge oil imports.
Steel capacity addition has also been delayed by difficulties
in obtaining land and environmental clearances, as highlighted
by South Korean company POSCO's nine-year wait to
build a $12 billion plant in India's Odisha state.
The BJP has promised time-bound environmental clearances and
better land acquisition policies to promote manufacturing.
"We don't just want to be a commodities or natural resources
exporting country," BJP's Taneja said. "We want to become a
manufacturing giant of the world."
(Additional reporting by Manolo Serapio in SINGAPORE; Editing
by Douglas Busvine and Ed Davies)