At a time when the steel industry is reeling under a severe shortage of iron ore, following the suspension of mining in Goa and Karnataka and the imposition of a cap on mining in Odisha, miners are seeking a drastic cut in the export duty on the commodity.
The mining industry, represented by the Federation of Indian Mineral Industries (Fimi), is also seeking the railways charge uniform freight rates on iron ore.
In FY10, the ministry of finance had imposed five per cent duty on the export of iron ore fines. This was raised to 20 per cent in FY11 and 30 per cent in FY12. Between February 2010 and March 2012, the railways increased freight nine times. Today, it is about four times the domestic freight for iron ore (Rs 2,600 a tonne). Fimi says as a result of these factors, iron ore exports have turned unviable.
During the first eight months of this financial year, iron ore exports declined 62.3 per cent to 15 million tonnes (mt), against 39 mt in the year-ago period. In a pre-Budget memorandum to the ministries of finance and railways, Fimi has urged for a cut in export duty and railway freight to ensure the industry recorded high exports.
“The export duty of 30 per cent on iron ore fines is a deterrent to the effective functioning of the Indian mining industry. During our recent interaction with the ministry of finance, we requested the government to reduce export duty on iron ore fines in Budget 2013-14 to five per cent,” said R K Sharma, secretary general, Fimi.
Earlier, the ministry of mines had also requested the finance ministry to reduce duty on iron ore exports. Sharma said India was losing ground in global markets — its share in iron ore exports to China fell from 20 per cent in 2007 to 11 per cent in 2011 and eight per cent in the first half of 2012. This financial year, the country was also losing foreign exchange due to imports, he added.
Fines are a co-product of producing calibrated lump ore. The ratio of lumps generated to fines is 30:70.
Vinod Nowal, director and chief executive of JSW Steel, however, said, “Reduction of duty on exports will not help the domestic steel industry, which is already facing a huge shortage of quality raw material. Why should India reduce its duties when countries such as Australia and China have imposed 25 per cent and 30 per cent duty on iron ore and coal, respectively? There is no necessity for India to reduce the duties.” He also justified the railways’ differential freight system, saying the railways didn’t carry anything during the return trip after carrying iron ore meant for exports. However, when it carried iron ore to domestic mills, finished steel was carried during the return trip.
Basant Poddar, managing director, Mineral Enterprises, said now, the Karnataka mining industry’s priority was to restart mining, adding as of now, it would do well not to worry about the duty structure.
Fimi has also sought the duty on iron ore imports be brought on a par with the duty on iron ore exports. Currently, import duty on iron ore lumps and pellets is 2.5 per cent.