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Mines ministry for iron ore export, says any ban to affect sector

Economy Bureau

Posted: 2008-06-27 22:55:46+05:30 IST
Updated: Jun 27, 2008 at 2255 hrs IST

New Delhi, Jun 26 : Divergence views has appeared between the ministry of mines (MoM) and the ministry of finance, with the former stating that banning export of iron ore at a time when iron ore prices are at an historical high would have adverse effect on the mining industry.

The Parliamentary Consultative Committee attached to the MoM, chaired by the minister of mines, Sis Ram Ola, was of the opinion that this is not the opportune time when India should be putting in any restrictions on export of the commodity. The ministry is also of the opinion that a ban on the export of iron ore would have an adverse impact on domestic prices of the commodity and consequently on the development of iron ore mining as a whole.

Export account for almost 50% production of iron ore. When market shrinks due to export restrictions and limited local demand, prices will fall to the point of marginal profitability leading to the closure of a number of mines. Fall in prices will also lead to deprivation of the plough back surplus of the mining sector, and the lower profits of the iron ore mines will drive away investment from exploration and mining.

Regarding the justification for restricting export of iron ore from the perspective of availability or rate of depletion of reserves, the MoM has opined that there does not appear to be justification. “According to the National Steel Policy (NSP) 2005, annual export of iron ore is likely to grow to about 100 mt by 2020. If this estimation holds good, the depletion of Iron Ore resources, 10 years from now, would only be between 0.8 and 1.0 bt out of the current resources of 25.25 bt,” a statement ministry of mines said.

In view of the fact that the ministry of finance has recently imposed an export duty of 15% on an ad-valorem basis on all exports of iron ore, the MoM said the country has sufficient resources of iron ore and any measures to restrict the export of iron ore would adversely effect the iron ore mining and the livelihood of about 6 lakh people employed in iron ore mining and in the tertiary sector. The ministry is of the view that with the excess capacity and supply, there was no reason why prices of steel and iron should be increased in the domestic market.

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