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Indian Corruptonomics – Illegal Iron Mining benefits Vale, BHP and Rio Tinto as Exports Drop 90%

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Illegal Mining and Environmental Degradation has been a major problem in India with corruption spread across the political and business spectrum. Millions of tons of iron ore have been mined illegally in major ore producing states such as Karnataka, Orissa and Goa. Some of the mining barons have made billions of dollars in illicit profits. Many of these mining company owners have become top leaders of the major national parties using the money gained through mining and illegal exports.

Read more about Iron Ore Mining in India.

Backlash against Illegal Mining

The major mining scams have resulted in India’s Supreme Court halting most iron ore mining operations in Karnataka and Goa until the damage can be assessed. This has led to huge difficulties for steel companies in India who have had to import expensive iron ore. India has one of the largest deposits of iron ore and is both a big user and exporters of the metal. However the production has decreased drastically leading to imports by a country which used to be a top exporter. The Shah Commission which was formed to investigate illegal mining may extend the ban to another major mining state Orissa. The state government has already imposed a ridiculous sum as a fine on iron ore miners which the companies have refused to comply with. The corruption and governance mess has benefited the global mining majors like Vale, BHP and Rio Tinto which are struggling as demand has waned from China. Many of these companies have cut capex and jobs in order to deal with the declining global iron ore demand. Corruption in India has strangely proved to be a life saving boon for these companies.

Read in detail about India’s Mining Industry and Companies.

Mining Majors reap $15 billion in profits from India’s mining woes

India’s campaign to end illegal mining — which authorities say has cost Goa and Karnataka states around 510 billion rupees in lost revenue in the last decade — has cut its iron ore output by more than 20 percent in the year to March and its exports by almost double that.Annual exports, which in the past decade peaked at nearly 106 million tonnes, may dwindle to as low as 5 million tonnes over the next year, analysts say.

The roughly 100 million tonnes of lost exports at the current average price of around $110 per tonne and another potential 30 million tonnes of imports of higher-quality ore at around $140 per tonne will cost India $15 billion, according to Reuters calculations, money that goes straight into the pockets of foreign miners picking up the slack.India’s role switch is one reason for a rebound in iron ore prices, which this year fell below $87 a tonne to their lowest since 2009 due to China’s slowing economic growth.India’s iron ore exports to China fell to less than 300,000 tonnes in October — the lowest in at least two decades — after the ban in Goa. That followed a mining ban in Karnataka in 2011, after shipments there were halted a year earlier. Goa’s once-bustling mining hubs have turned into ghost towns, with scores of empty trucks parked by the roadside. Trains, some still loaded with ore, are stopped on the tracks.

Indian government has no clue about how many mines and leases are there

After being ticked off by the Supreme Court-appointed Centrally Empowered Committee over “erroneous and incomplete data” on mining, Goa Chief Minister Manohar Parrikar has sought to deflect the blame on erstwhile Congress regime for the “mess-up”.
“The former government had miserably failed to maintain the records, including the number of operational mining leases, exports and productions. This mess is inherited by my government which is now working overtime to put in place all the records,” Parrikar told reporters.

In a strong-worded letter to the state chief secretary, the Centrally Empowered Committee, which is inquiring illegal mining in Goa, had complained about “erroneous and incomplete data”. Justice M B Shah Commission also investigating into the illegalities had expressed similar complaint in the past.
Clearing the air on the issue, Parrikar said, “A total of 130 mining leases were operational in the state for last five years. There is no proper record of all these mines. The mines department was also unaware about 400-odd traders who were involved in the business”.

Rio Tinto cutting jobs Left , Right and Centre

Rio Tinto PLC is cutting jobs at its regional headquarters in Melbourne and closing an office in Sydney as the Anglo-Australian mining giant moves to contain costs, two people familiar with the matter said Tuesday.The restructuring is the latest sign that Australia’s mining boom is running out of steam as China’s economy slows and Europe struggles to resolve its debt crisis. Resources companies are showing increasing caution about the timing of any recovery in demand and commodity prices—an approach demonstrated by BHP Billiton Ltd.’s shutting a coal mine in Queensland state and Rio Tinto’s putting another under review.




Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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