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The power-guzzling Indian steel genie

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The Parliamentary Consultative Committee to the Ministry of Steel and Mines has just met. Its chairperson, the Union Minister of Steel and Mines, Narendra Singh Tomar, has following the meeting made an announcement which, if even partly pursued, will alter hugely India’s energy use, our energy mix and our emissions of CO2. Its ecological impact can barely be guessed at.

Tomar said that until 2014 India was the fourth largest producer of iron and steel in the world (after China, Japan and USA). The first five months of 2015, according to industry data, indicate that India will end the year one position higher. This possibility is seen as a triumphant landmark by the present government, for USA will then be relegated to fourth place.

As the table alongside shows, India produced 81.3 million tons of steel in 2013 and 86.5 million tons in 2014 (data from the World Steel Association). The achievement that the minister is so proud about is the data for January to May 2015, during which time India produced 37.6 mt compared with the USA which produced 33.1 mt. On this basis, Tomar and the ministry and the country’s iron and steel industry see a bright future.

Country-wise steel production. Table and data: World Steel Association

Country-wise steel production. Table and data: World Steel Association

So bright indeed that Tomar (having duly consulted the mandarins who are in the know of such things in the ministry) announced that as India’s per capita steel consumption is “quite low, 60 kilograms as against the world average of 216 kilograms, this low consumption no doubt indicates huge growth potential for Indian steel industry”. It hasn’t occurred to any inside the ministry or outside it apparently to wonder whether we would get by quite nicely with 60 kg per person per year or even 50 kg, now that so much has already been built using iron and steel.

But no, Tomar has instead grandly announced to the members of the Parliamentary Consultative Committee that “India has fixed a target of 300 million tonnes production capacity by 2025 and steel ministry is working out action plan and strategies to achieve this target”!

Where did this absurd ‘target’ come from? Does the Union Minister of Steel and Mines simply make numbers up as he wanders about gawking at blast furnaces and iron ore mines or are there advisers in this ministry, in the Ministry of Power (which includes coal and renewable energy), in the Ministry of Environment, in the Ministry of Rural Development and in particular in that ministry’s Department of Land Resources, who has given him these numbers? Or has this monstrous and foolish number come from the world’s iron and steel industry and in particular its Indian private sector heavyweights?

The World Steel Association, which serves as the apex association of the metalmen, scarcely bothers to camouflauge what it wants – that the two big and neo-liberally growing Asian economies continue to feed their appetite for iron and steel. “Despite continued turbulence around the world in 2014, it has been another record year for the steel industry,” explained the Association in its 2014 statistical round-up. “Crude steel production totalled 1,665 million tonnes, an increase of 1% compared to 2013. 2014 also saw the emergence of a new phase in steel markets. For the past decade, the steel industry was dominated by events in China. The evidence is that the steel industry is now entering a period of pause before undoubtedly picking up again when markets other than China drive new demand.”

That phase concerns India, the pause is the building of new steel-making capacity in India (and the staking out of new areas, many under dense old forest, to dig for iron ore and for coal), we are the market other than China (whose steel plants are working at 70% of capacity, if that, and whose consumption growth has stopped), and it is India, in this metallic calculation, that will drive new demand. That is the reason for Tomar’s announcement of per capita kilo-consumption of steel and the 300 million ton figure.

It is scandalous that a minister in charge of a major ministry makes such an announcement without a moment’s thought given to what it means in terms of energy use and what it means in terms of raw material. It takes a great deal of energy to make a ton of steel. Industry engineers call it energy intensity and, including the wide range of methods used to make steel and the wide variety of raw materials used, this energy intensity varies from about 15 gigajoules (GJ) per ton to about 23 GJ per ton.

Put another way, it takes as much energy as 22 average urban households in India use in a month (at about 250 units, or kilowatt hours, per month each) to make a ton of steel. This is the equivalence that ought to have been discussed by the Parliamentary Consultative Committee so that choices can be made that lead us to decisions that do not bury us under kilograms of steel while we suffocate from pollution and have no trees left to provide shade. The equivalence begins with the 86.5 million tons of steel India produced in 2014. This is 237,000 tons per day. India also generated some 1.2 million gigawatt hours of electricity in 2014-15. The two measures are not operands in the same equation because steelmaking also uses coking coal directly.

What we do know is that the residential and industrial sectors consume about 40% and 30% respectively of energy generated, that the making of iron and steel is extremely energy-intensive (it is estimated to account for about 6.5% of India’s total emissions), and that this sector alone accounts for a quarter of India’s total industrial energy consumption. And this is at 86.5 million tons, whether we stand at third or fourth place on the world steelmaking victory podium.

To make these many tons (for our regulation 60 kilos per year ration) it takes a gigantic quantity of raw material. A ton of steel produced in a basic oxygen furnace (which is how 42% of our steel is made) requires 0.96 ton of liquid hot metal (this in turn comes from 1.6 ton of iron ore and 0.6 ton of coking coal) and 0.2 ton of steel scrap. A ton of steel produced in an electric-arc furnace (58% of steel is made this way in India) requires around 0.85 tons of steel scrap and supplementary material amounting to about 0.3 tons (the coal having been burnt in the thermal power plant elsewhere).

What justification can Minister Tomar and his associates provide for this mad project to enclose all Indians in choking suits of armour? it comes from the world’s foremost ironmongers, speaking through their association: “The impact of urbanisation will have a key role to play in the future. It is estimated that a little more than one billion people will move to towns and cities between now and 2030. This major flow will create substantial new demand for steel to be used in infrastructure developments such as water, energy and mass transit systems as well as major construction and housing programmes.” And there we have it – the urbanisation obsession of India translated into ever heavier per capita allotments of metal, and to hell with the trees and the hills.


Written by makanaka

July 7, 2015 at 23:18

Costing Goa’s mineral resource curse

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Coconut palms line bunds between fields and alongside streams

Coconut palms line bunds between fields and alongside streams

In late August we had a discussion to talk about the ways in which the ‘suppressed entitlement’ of Goa’s population, in relation to mining profits, could be freed. This would have the effect of galvanising a sense of right and ownership using the admittedly troublesome monetary incentive route (we will find a way to deal with this).

The concentration of wealth is astonishing, even in a region that is part of a country whose state Gini coefficients for income are well over 0.45 (over 0.30 is considered to be potentially socially destabilising). Goa’s top six iron ore mining families together with India’s largest private sector iron ore exporter have amassed immense wealth. Based on the derived industry profit for 2009-10, the share per resident family is Rs 3.19 lakh (not including profits from illegal ore sale, not subtracting for the ‘producer’s share of risk and managerial input’).

Based on time-series profits for the years 2000-01 to 2009-10 and average per ton prices we can ‘entitle’ the 360,000 resident families to their ‘withheld shares’ as follows: Rs 2.80 lakh in 2008-09, and working backwards Rs 2.50 lakh, Rs 2.15 lakh, Rs 1.80 lakh, Rs 1.45 lakh, Rs 1.10 lakh, Rs 76,000, Rs 40,000 and Rs 28,000. This totals close to Rs 16.5 lakh due per family for a decade of mineral exploitation. That’s one aspect, to place in perspective the stratospheric super-profits of the main mining families (companies). The other is to work towards a ‘true cost’ accounting of the extraction.

Rice is still planted and harvested in the coastal talukas, but fields such as these are threatened by urbanisation

Rice is still planted and harvested in the coastal talukas, but fields such as these are threatened by urbanisation

The startling per family ‘entitlement’ also raises the question of how they have been used by the state of Goa. The indications from the contribution of mining and quarrying (the basic accounting head) in the Goa state accounts is that this has contributed between 6% and 4% of state domestic product. We may raise this contribution by 2% to include mineral extraction activities not covered directly by this head. Even so, where is the gross capital formation rate at the state level to show how this wealth has been used? Where is the rise in the net savings rate to show how this wealth has been retained? These are serious questions for the state government to answer.

A ‘true cost’ accounting of the extraction will help us achieve two things:

1. It will help fix the liability of the state administration towards the costs of ecosystem loss and degradation caused by mineral extraction.

2. It will similarly ‘spread the liability’ on a per family basis so that an economic disincentive is created at the household level for such an activity (mining) if households shared both profit and liability.

How are the populations of the 11 talukas (populations in the note below) to benefit from their share of ‘entitlements’ and ‘liabilities’ of the export profits and environmental burden of iron ore mining? To what extent must the state administration bear the liability and underwrite the costs of mitigation for all of Goa’s affected (directly and indirectly) families? How can participatory shares and fund instruments be created that embody these concepts, who will regulate them, how will they be counter-guaranteed? These are the community economics questions that will face us when we make such calculations.

The full article is on this page.