Q&A with Wahidullah Shahrani, Afghanistan’s Minister for Mines: "India will consume most commodities by 2030" "

At an interview with Wahidullah Shahrani at his office in Kabul on 6th June 2011

by Ajai Shukla

Kabul, Afghanistan

Business Standard, 12th June 2011

With 22 companies, including two Indian consortia, bidding for an integrated project to develop the 2 billion-tonne Hajigak iron ore deposit in Bamiyan Province in Central Afghanistan, Wahidullah Shahrani, Afghanistan’s minister of mines, spoke about the giant project to Business Standard’s Ajai Shukla in Kabul.

Q. Is the tendering on track?

The process is on schedule and the response has been encouraging. We facilitated the visit to Bamiyan of [the bidders], and gave them a tour of the Hajigak deposits. The closing dates for the submission of final bids is 3rd August and the [Afghan] government will make a decision sometime in October.

Q. The bids will encompass far more than just the extraction of iron ore from Hajigak?

Besides the extraction of ore, the bids will include setting up a steel production plant utilising the nearby high-grade coking coal deposits; [exploitation of] the high-quality chromite deposits in the same package; job creation in Afghanistan; infrastructure development including railroad and power; and the evacuation of ore and steel to neighbouring countries for the entire duration of engagement, which should be 35-40 years. Also, other benefits like paving the way for establishing a cement plant… [there is] strong potential demand for cement in Afghanistan as a post-conflict country where construction is the largest sector.

Q. And the bids will be evaluated as a comprehensive package?

The bids would be evaluated based on comprehensive economic criteria… [including] royalty to the Afghanistan government, infrastructure development, vertical integration to maximise employment, and issues of environment. The bidders’ commitment to corporate social responsibility (CSR) norms, and to bringing about sustainable development of the area, will be major factors in our evaluation.

Q. Security remains a major concern for the bidders.

The companies can be confident that the Afghan government will make all security arrangements. From securing the workers’ camps, the steel plant, movement in Kabul, in Bamiyan and in between… all that will be our responsibility.

Q. And if Indian companies, which face especially serious threats, say they would like to secure their own camps?

We will be flexible of course. Even though in Hajigak… all the arrangements have already been made.

Q. The Bamiyan area has other potentially lucrative deposits besides Hajigak… such as the Sia Darra iron ore deposits. Will a company that steps forward in Hajigak be preferred when other deposits in the area are awarded?

Those companies will be much more competitive because of their strong presence in the area, their local knowledge, their well-developed infrastructure… they will be in a very competitive position [to bag any future mining contracts in the area].

Q. There is some uncertainty about evacuation infrastructure, on which the ore and steel would be moved out to regional and international markets. What would the Afghan government like to see?

After we evaluate the final bids, there will be negotiations over how to develop the infrastructure. We have been hearing that some companies want to evacuate 25 million tonnes of iron ore [annually] to India, which requires significant investment in developing a railroad. In those negotiations… all options will be taken into account including size of the railroad, its capacity and routing. A linked issue would be the upgrading of dry ports in Afghanistan for handling 25 million tonnes of iron-ore, or 20 million tonnes of steel per year.

Q. Would you could indicate your preferred evacuation route, or leave the decision to the company?

The Afghan government would have strategic preferences, but any decision would be arrived at in consultation with the company.

Q. Two or three routes are being considered. Firstly, evacuating the ore through Uzbekistan, via Mazar-e-Sharif. Then there is talk about evacuating through Pakistan…

…Which is the most convenient one in terms of location, but India would have other concerns here. However, based on the new Trade and Transit Agreement that Kabul signed with Pakistan a year ago, Afghanistan can export anything to India… not just traditional exports like fresh and dry fruits but anything, including our mineral wealth. Steel produced in Afghanistan, even by a foreign company, will be treated as Afghan exports.

Q. But Pakistan insists that goods from Afghanistan be unloading at Wagah and transhipped onto Indian containers. Is that feasible for large volumes of minerals?

All the ore will not be exported to India…. There is also huge demand from other countries of the region, like Iran, Tajikistan, Turkmenistan, Russia, and China. To assess the commercial viability of the project, you have to consider the demand from other regional countries. But India certainly has a huge demand and we believe that, by 2030, India will be the largest consumer of commodities in the world.

Q. There is also the option to supply the ore to China, which would evacuate it through the route it builds for the Aynak copper mines.

That is an option. Alternatively, it could be evacuated through Iran, through Chabahar port, to which the government of India has built a highway. But I believe that whichever company wins the Hajigak contract would use a combination of options, supplying the demand from within Afghanistan, from neighbouring countries, supplying to China, and also evacuating it back to India.

Q. India has offered to set up a school of mines in Kabul?

I made the request when I visited Delhi [last year]. And, when Dr Manmohan Singh visited Kabul last month, he confirmed that the GoI would support the National Institute of Mining as part of its aid package to Afghanistan…. The Indian School of Mines (ISM), Dhanbad, is assisting us in developing the curriculum. Our focus will be on metals, coal, mineral economics, mineral law, environmental and health issues, contract management etc. It will be a comprehensive mining institute. Two faculty groups have already gone for training to ISM Dhanbad.

Q. Does all this place India in an advantageous position in bidding for Afghan mines like Hajigak?

India is in a very advantageous position. Besides the traditional and historical linkages between the two countries and their strategic relationship, India has become the fourth largest economy in the world and, by 2030, India will become the world’s largest consumer of commodities…. We have a special feeling for the people of India; their investment will be culturally comfortable. Given the glorious future of the Indian economy, investment in Afghanistan’s commodities will be very much in India’s benefit. And finally, India has emerged as a major contributor towards Afghanistan’s development with an aid contribution of around $2 billion. We would welcome large-scale investment by India into Afghanistan.

Q. Have you zeroed in on the next big project after Hajigak?

After Hajigak, in July this year, I will put five major projects on tender: three copper and two gold deposits in different parts of the country and, in February of 2012, I will put a huge oil basin in the northern city of Mazar-e-Sharif on tender. In addition, we are having good negotiations with Indian companies for developing chromite deposits. The economic advantage of most of Afghanistan’s deposits is that they are open pit deposits, and commercially very viable. Plus the potential of cement. We are a post conflict country, which is expecting to consume about 6.5 million tonnes of cement annually. India is the world’s third largest producer of cement and we have been negotiating with a number of Indian companies for investment in this very important sector.