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Make in India Push Faces Red Tape

Make in India Push Faces Red TapeMake in India Push Faces Red Tape

Prime Minister Narendra Modi is seeking to turn India into a global manufacturing hub by curbing red tape. Tell that to Tata Steel Ltd., which closed one of its largest iron-ore mines in September over permit delays.

India’s largest maker of the alloy isn’t alone. Steel Authority of India Ltd. shut one of its top-yielding quarries the same month pending renewal of its lease. JSW Steel Ltd.’s plan to start mining in eastern Jharkhand state has been hampered by a probe begun last month into mine allocations, Bloomberg reported.

Modi is set to trumpet his “Make in India” initiative at the Group of 20 summit in Australia this week as he vies with China to woo manufacturers. The mine closures show lingering bureaucratic obstacles to his push, stemming from court rulings and officials in India’s 29 states that lie beyond Modi’s direct control. India slid two places to 142nd out of 189 economies in the World Bank’s latest ease of doing business rankings.

“There are things beyond the government’s control,” said Taimur Baig, chief economist at Deutsche Bank AG in Singapore. “If a court makes a pronouncement there is nothing really that the executive can do. For better or for worse, India has many more layers of checks and balances.”

Steel Authority of India’s shares fell 0.8 percent as of 1:04 p.m. in Mumbai, JSW Steel was up 0.3 percent and Tata Steel rose 1.7 percent. Steel Authority is up 14 percent this year, JSW Steel 21 percent and Tata Steel 13 percent, less than the benchmark S&P BSE Sensex’s 32 percent increase.

  Abundant Supplies

Modi introduced the “Make in India” drive in September to lure investment and revive economic growth after sweeping to office in a landslide victory in May. His government aims to boost manufacturing’s share of India’s $1.9 trillion gross domestic product to 25 percent from about 15 percent currently.

The government needs abundant iron ore supplies as it vies with nations such as Thailand and Indonesia to become a production hub. The ore is used to make steel, which in turn is used to manufacture everything from cars to railway lines.

Yet judicial mining bans over environmental and regulatory lapses led to a drop in iron ore production in four of the past five years. That’s stoked local prices even as global rates fell, and some buyers are turning to imports.

Spot prices of iron ore in Odisha, the biggest producing state, have gained 31 percent in the past year to 3,200 rupees ($52) a ton, said Gunjan Aggarwal, an analyst at commodities consulting firm CRU Group. Prices at China’s Qingdao port have slid 44 percent to less than $76 a ton as of Monday.

Steel rebar from China at Indian ports cost 37,000 rupees ($600) a metric ton in October, compared with Steel Authority of India’s price of 44,000 rupees, the company’s data show.

Financialtribune.com