As the Indian economy grows, its natural resource consumption will progressively outrun its domestic base. The prospect has engaged the Central government for some time. It has virtually banned new iron-ore exports. Till now it was rejecting new export plans; in the last budget it also imposed a duty to make exports under existing contracts more expensive. Although India’s coal reserves are immense, its coking coal is of poor quality; for over a decade, the government has allowed steel companies to import coking coal. With the liberalization of foreign investment, a group from Gujarat has bought a coking coal mine in New South Wales, and is importing its output. The Kumaramangalam group has bought copper mines in Australia. Coal India is also getting ambitious. It is proposing to raise $1 billion through a share issue, and may use some of the proceeds to buy mines abroad.

A view is emerging within the government that as the 21st century advances, global shortages of natural resources will emerge; that there will be an international scramble involving governments, and that the government should prepare for it by setting up a large, rich corporation of its own. Over the past 15 years, the government has allowed increasing scope to the private sector; this liberalization has paid off handsomely in terms of growth and diversification of the economy. Do the likely conditions in the world natural-resources markets call for a reversal of this policy in this area? Will the State be more efficient in pursuing resources abroad? There is a record of sorts, in this respect, in the Oil and Natural Gas Corporation. It is India’s largest corporation; thanks to its ownership of low-cost reserves in Bombay High, it has accumulated enormous profits in recent years. It has tried hard to acquire reserves abroad, but with little success. Realizing this, the government arranged its marriage with the Lakshmi Mittal group for pursuing concessions abroad; till now, however, this union has produced no offspring.

Two considerations go against the setting up of mammoth government enterprises for tasks such as search for minerals. First, the government is a hierarchical organization; the decisions of its corporations are subject to interference from, if not always approval of, secretaries, ministers, committees and what not. The decision-making machinery is therefore slow and not always efficient. And second, whilst the government may think that its clout would help in securing resources abroad, its involvement may work against the objective if its relations with a foreign government are not good or if the latter prefers private investment. Hence, it would be best on balance if the government were not to take an initiative. If, however, exploitation of resources abroad requires large capital, the government may provide some of it in national interest. Betting on private initiative may pay better dividends than the creation of an unwieldy juggernaut.