Duty Hike Hitting Iron Ore Exports in India

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MetalMiner welcomes guest columnist TC Malhotra. Based in New Delhi, Malhotra will be reporting on the Indian metal markets and manufacturing industry.

India’s Mines Ministry has expressed concern over the 20 percent export duty on iron ore imposed in the Union budget. Indian news agency Press Trust of India (PTI) quoted Mines Secretary S. Vijay Kumar as saying, “If there are no domestic takers and exports are discouraged, what will happen¦? Kumar also said that the export duty hike will hit the miners from Goa and Karnataka state hard, since about 78 percent of the iron ore produced in the Goa state is in the form of fines, while Karnataka also produces more iron ore in the form of fines as compared to lumps.

Indian Finance Minister Pranab Mukherjee had fixed a uniform export duty of 20 percent on all types of iron ore in the 2011-12 budget, which is of course a primary steel-making raw material. Before the budget announcement, the export of iron ore lumps attracted a duty of 15 percent, while export duty on iron ore fines was 5 percent.

The finance minister’s move to hike export duties on iron ore has been seen as fulfilling the long-standing demands of the steel industry, which had wanted more supplies of iron ore at low costs. By way of background, India exports mainly the Ëœfines’ form of iron ore and its export duty has gone up. India, which produces 218 million tons of iron ore a year, had shipped over 100 million tons of iron ore in 2009-10 and 70-80 per cent of that was in the form of fines.

The Federation of Indian Mineral Industries (FIMI) has also written to the finance minister, requesting a rollback. “We would be grateful if you consider sympathetically rolling back the increase in export duty to pre-Budget 2011-12 level, FIMI Secretary General R. K. Sharma wrote in a letter to the Finance Minister.

Shantaram Naik, an Indian lawmaker from Goa state, has said in a statement that iron ore extracted from Goa mines is of low grade and that it has no market in the country.

“Mine owners may survive in their own way even with the increase of duty but the fate of 15,000 truck owners who are engaged in the business of transporting ore, and in general, fate of the 20 percent population which directly or indirectly depends upon iron ore activity in Goa, will be doomed,” he pointed out.

Goa exports around 40 million metric tons of iron ore annually through its two ports. The Goa state has 100-odd mining sites, which are situated in the remote talukas of Sanguem, Quepem, Sattari and Bicholim.

However, the finance minister’s decision has been hailed as a good thing by the steel industry.

Merchants’ Chamber of Commerce’s Iron and Steel Committee Chairman Santosh Bajaj said, “It is a very good step to increase the rate of export duty for all types of iron ore. It was our long-standing demand. Export of iron ore cannot be banned completely. The steel industry was suggesting [a] hike in export duty on iron ore. So the move is in the interest of the steel industry. He added, “Availability of raw materials like iron ore is beneficial for the domestic market. It is a welcome move.

India, which is the world’s third-largest supplier of iron ore, has a sizable iron ore trade comprising at least 100 exporters, with companies such Sesa Goa, Essel Mining and Rungta among the biggest. India has huge deposits of iron-ore in Bihar, Orissa, Madhya Pradesh, Goa, Karnataka and Maharashtra state.

–TC Malhotra

Comments (4)

  1. Some of the policy decisions at work here are highly mysterious- why discourage exports of a commodity (in this case low grade iron ore fines) that have little or no value in the domestic market? My research suggests most Indian producers do not even possess the technology to use these fines so it seems like the policy only hurts the domestic miners export business without really aiding the domestic steel industry. Very confusing…any thoughts on the goal there?

  2. Rohan Nakhwa says:

    Hi,

    well looks like these steel companies are only interested in reducing the price of iron ore. they want cheap ore but they wont reduce the price of the finished product. only reason they discourage exports so that the ore remains unused & then they can buy it at cheap rates. if exports are encouraged then they have to match the international prices of iron ore for buying it. although they buy iron ore at cheaper price than export price their finished product cost more than the impoted iron finished product,,please explain that!!!!

  3. admin says:

    Steel manufacturers feel that the hike in export duty of iron ore will force the mine owners to bring down the price of iron ore. The decision will benefit the country’s steel industry when the sector is facing a raw material crisis. Availability of raw materials is beneficial for the domestic market. Steel manufacturers say that the hike in export duty would ensure higher raw material availability to domestic steel producers.

    –TC Malhotra

  4. shankar jog says:

    14th May, 2011
    It is surprising that everybody is opposing duty hike on export of iron-ore. However, nobody is thinking about the high rate the exporters are getting. Indian price is about Rs. 2300/- per tonne whereas exporters are selling the same Rs. 6000/- or more. We dont know for sure what actual sale-price is shown to the Govt. and how much is dealt off the record. Mostly off the record money is stashed away in overseas banks.
    Iron-ore available in the Country is National Wealth and should not be squandered away by exporting indiscriminately. It should be preserved for posterity, rather than exporting to build other nations.
    If there is no technology with Indian Steel Mills for using iron-ore fines, let them develop it or purchase overseas and preserve untill then our National Wealth for future use. Instead of this, Indian Governments are keen to export it for quick buck for them and the mining companies. In Goa, 100% mining companies are private companies, and this National Wealth is looted by them, giving paltry sums to Public Exchequer by way of royalty, rent and export duty. They start crying for royalty increase, rent increase or export duty increase, immediately. Actually, all export of iron-ore should be banned and export and other duties should be so hiked that export becomes un-economical.
    Also iron-ore has another side. To balance trade deficit we have to import useless items like toys, fashion gear, plastic material, fire-crackers, etc.
    Hope somebody will hear this side also and not only crying of mining companies.

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