Less than two weeks after reviewing the duty structure on iron ore, the government has once again swung into action to help the domestic steel industry that is reeling from the sudden crash in prices of the metal. The finance ministry has withdrawn the specific Rs 200 per metric tonne tax on exports of iron ore fines and has now replaced it with an 8% ad valorem export duty.
?This will further lower the tax burden on the domestic steel companies and make our exports more competitive,? a finance ministry official said. While iron ore lumps are used much more by domestic steel producers, iron ore fines are mainly meant for export as they do not have much off-take in the domestic market.
On October 31, the finance ministry had scrapped the 15% ad valorem export duty imposed on iron ore lumps and fines in June this year and introduced the Rs 200 per tonne tax on iron ore fines. It had also withdrawn the 15% export duty on long products items like, iron and steel ingots, bars and rods, angles shapes and sections as well as pig iron to bail out the domestic steel industry facing problems of falling prices.
The move, however may still be opposed by the stand-alone iron ore miners who are against any export duty on the product. They have been pushing for a complete withdrawal of the export duty on iron ore fines. With international prices of the commodity having crashed by more than 50% in the last two months, iron ore prices are not that high — at around Rs 5,000 per tonne from a high of Rs 10,000 per tonne during May — that it warrants an export duty, especially on fines, according to the mining industry. In fact, according to an estimate by the Federation of Indian Mineral Industries, iron ore exports from the country dipped by nearly 60% to 3.9 million tonne in October this year from the same month a year ago.
However, the steel industry would welcome the move to levy the export tax on ad-valorem basis on iron ore fines. With falling prices, which is leading steel companies to cut production the outlook for the sector is grim. The fall in prices is mainly because of the slowdown in demand from key end-user segments like automobiles, infrastructure and construction.
