Sucheta Dalal :Dangers of heavy me<x>tal scrap trade in India
Sucheta Dalal

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Dangers of heavy metal scrap trade in India  

Oct 11, 2004


If ‘war scrap’ routinely contains live ammunition, why hasn’t it been reported?

Dozens of live rockets and shells that are cropping up around Delhi and Ghaziabad after the blasts at Bhushan Steel’s factory expose another sordid saga of the damage that can be wreaked by lax regulation, sloth and corruption.

It needed the death of 10 persons and the discovery of live ammunition in several places around the country for the government to wake up to the need to re-examine the metal scrap import policy.

Commerce and industry minister Kamal Nath talks about ensuring that the blast won’t happen again. But don’t bet on it. I’m sure that similar sentiments were voiced in March 2001 when the same Bhushan Steel and another called Aarti Steel had reportedly caused seven deaths and serious injuries to 17 others. This time, as well as on the earlier occasion, two managers of Bhushan Steel were arrested. The owners escaped responsibility. The difference is that Bhushan Steel’s workers seem unwilling to become the scapegoats this time.

Bhushan Steel has however swung into defensive action. The company has filed a case of fraud in the Delhi High Court against Lucky Steel of Dubai and a Mumbai agent called Metco Marketing India Pvt Ltd, from which it bought the scrap.

Heavy melting scrap (HMS) is being imported by the container load for decades and the price depends on the origin (place) and kind (disaster, war, quality). Since it is not pre-sorted, it often contains live shells or explosives when sourced from war zones. Importers routinely sort the scrap for reusable or high value items including brass, copper wire, lead and sometimes even re-usable engines or parts.

• Most developed countries ban import of scrap from war zones

• Nearly 3,000 tonnes of war scrap was recently imported by 4 local companies

• Government needs to temporarily ban import of scrap from war-zones

War scrap is usually coveted since it contains copper and tank metal, this is especially true after steel prices began to soar. But Iran ‘war scrap’ is available $30 or 10% cheaper say trade sources, because copper from the scrap is removed. Debris from the eight year Iran-Iraq war and the increased supply coming in from Iraq after the Americans flattened that country has made it a big source of scrap, rich in live ammunition and explosives. Most developed countries ban import of scrap from war zones; others have strict rules of entry, including third-party inspection.

But clearly, those who import ‘war scrap’ know exactly what to expect. They routinely sift and segregate such scrap and sell whatever fetches higher value. More importantly, not all scrap importers in India buy from war zones. Some of the biggest importers insist on avoiding Iran. Since Bhushan Steel admits to having imported scrap from Bahrain and Iran it also knew what it was getting; especially since there are other large importers who make sure that they don’t touch war scrap.

Our sources say that nearly 3,000 tonnes of war scrap was recently imported by four Indian companies around Delhi. This probably explains why so many live shells have been found near Ghaziabad after the Bhushan Steel blast. Media reports quoting police sources also indicate that scrap merchants are quickly dumping the shells and explosives found in their imports in various parts of Delhi to avoid hassles with the law.  

If ‘war scrap’ routinely contains live ammunition and explosives, why haven’t we heard of a system of reporting it to the police? Why is there no estimate of how often such ammunition is found and why is there no procedure in disposing it? Wouldn’t the absence of such a system suggest that there is probably a ready underground market for such ammunition among militants and terrorist groups? Those in the scrap trade already know all about the ‘grey’ trade in such explosives and ensure that imports are free of restrictions.  

The extent of the market is clear from the fact that a dozen projectiles or shells were found dump-ed by the roadside of the Grand Trunk road, many were recovered near residential areas and others picked up from places such as Bulandshahr, Aligarh, Kandla and Mundra ports in Gujarat over the last week alone. All these indicate panic among importers.  

Had the grey market not existed, the scrap would probably have been directly dumped into the furnace and the damage in that case would probably have engulfed all of Ghaziabad.

The issue raises several other questions. Can the government be sure that the problem is restricted to sporadic findings of rockets and shells? Are they certain that this is not a convenient conduit for shipping small quantities of ammunition to militants?

As is usually the case, no sooner is there a problem, than the intelligence and revenue agencies fish out warnings issued by them that were apparently never heeded. This time too, the Kolkata customs, among others, had reportedly warned about the possibility of such a blast just around a month ago. The Central Board of Excise and Customs (CBEC) is now in fire-fighting mode. It has suspended two customs officials and is now planning to change the scrap import rules or ban import from war zones. This too won’t help as long as there is a ready international system of fudging the place of origin to avoid detection. Given the large-scale corruption among politicians and bureaucrats, an outright ban will only defuse the tension and allow this sinister business to continue unhindered.  

As a first step, the government needs to temporarily ban import of scrap from Iran and other war-zones. Second, it needs to immediately put in place a system where one of the nine globally recognised agencies conducts a third party inspection of the scrap and the importer is made to obtain a certificate of origin from a recognised chamber of commerce. Industry circles say that such rules exist in most importing countries.  

Let’s now look at Bhushan Steel, the company that is in the eye of this storm. When corporate India is constantly talking about good governance, can this well-known company explain the compulsion to purchase dangerous war scrap? And will its powerful lenders, who are supporting a brand new Rs 3,000 crore integrated steel plant in Orissa demand changes in its functioning? Or will corporate governance and lenders’ responsibility be limited to endless discussions in five star convention rooms?

-- Sucheta Dalal