Business Line : Interview with Chairman - Fomento Resources

Alliance News, Industry News 2009-02-11 08:47:11


V.K. Varadarajan
Bangalore, Oct.7
Mining industry in Goa has been facing a welter of protests and agitations by environmental activists raising spectre of uncertainty over its long-term viability. Added to it the dwindling demand from China and falling reserves of the mineral.
In an interview to Business Line, Mr. Auduth Timblo, Chairman and Managing Director of Sociadade De Fomento Industrial Pvt. Ltd., a leading business group and mining company, answers questions on the industry to this correspondent, whose visit to the company’s facilities was sponsored by Fomento.
The Goa mining industry has been facing intensified agitation from environmentalist groups. How is the situation different from other parts of the country where similar protests have raised concern about the industry’s prospects?
What is happening in Goa is beyond the routine environment versus industry debate.   Here no one wants anything to happen in their backyard.   I call it the NIMBY (Not in My Backyard) factor.   At the same time, we have to admit that heightened mining activity has happened in Goa, because of the huge demand for ore from here from 2003. So a lot of ayaa-Ram-gayaa-Ram companies and parties have jumped in to mine whatever they get and any amount they get.    These two factors have combined to add to the protests and agitations.
Why can’t the Goa Mineral Exporters’ Association and the Government take a firm stand against disruptive elements?
The GMOEA is not even a registered body and needs to have far more credibility. It does not equally represent all sections of the mining community, so there is a gap there. The Mineral Foundation of Goa is highly credible but needs to be further strengthened and that’s the way to move forward.
What have you done to involve local communities and bodies like the Panchayat to underline the importance of mining as a means of economic development of local area and resist against uninformed NGO’s?
Our engagement with local communities has been all pervasive and engaging for over five decades.   We see this engagement as a natural part of our process of integrating local communities in our principal activity, which is mineral farming, as opposed to calling it just mining. We must understand that the basic act of digging the earth to mine iron ore is a small miniscule part of our operations.   Our work involves working closely with communities around the mining areas.   Most families are directly or indirectly employed or involved with the industry. That makes it imperative for us to work closely with local communities and bodies like the panchayats.   I can assure you that every local body where we work is completely with us and appreciative of our continuous involvement with them. 
With regard to disruptive NGOs, its a case of 5 per cent people making 95 per cent noise. These NGOs do not have a local mandate, nor do they have local support. You cannot call orchestrated noise NGO activity.  
The export demand from China, largest importer, has been dropping. What is the future of exports in a changing scenario?
The average export of ore for almost 25 years has been between 12 and 15 million tonnes annually.    After 2003, the annual compound growth has grown by 25 per cent per annum.    In the last three months of the previous year that growth jumped 30 to 50 per cent. However, towards the close of financial year 2007-08, there has been a fall in demand and I am afraid that this slide will continue. The demand from China after the Olympics has dropped.   Moreover, Australia and Brazil have ramped up their production facilities and are giving volumes.   That has and will impact the demand in India.   There is a distinct shift from a seller’s market, which will move to a buyer’s market, in the span of next three to 15 months. 
What are the expansion plans of Fomento?
We aim to be in the first quadrant of companies in our sector following the twin principles of cost benefit as well as efficient production, both overseas and in India. We are expanding operations in countries in Africa, who have asked up to deploy our best practices mechanism in their countries.
Better, cost-effective and environmentally-sound transportation of ore is one of our key objectives, but we also have to balance the fact that if we fully mechanise direct transportation not involving the use of trucks, we can be near nil pollution but then how much unemployment will that lead to.
Can we afford that? That is the big question. At this point of time, we have to choose between some pollution and large-scale social unrest, due to unemployment, we cannot afford the latter.   But we do realize that for the mineral industry to be sustainable and affective in the long run, we have to modernize and merchandise sooner than later.   It’s a fine balancing act.
With short term prices showing a sharp drop, shouldn’t the industry go for sealing long term contracts?
Long-term prices allow stability and are conducive for long-term mining.   The barometer of success is in long-term agreements with reliable iron ore buyers.


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