Days after Goa chief minister Digamber Kamat sought Prime Minister Manmohan Singh?s intervention in removing the 20% ad valorem export duty on iron ore fines, the mines ministry has told the government that exports should be allowed till the country?s steel makers geared up their machinery to consume the entire fines production of 126 million tonne.
In a letter to the Prime Minister on March 11, Kamat had expressed concern that the government?s decision to impose an ad valorem 20% duty on iron ore would hit the coastal state?s economy hard and would adversely impact its financial health.?The enhanced duty will only serve to curtail the export of iron ore from my state, which will drastically reduce our revenue resources. Besides, mining and tourism are the backbone of the Goa industry, so they have to be encouraged both in the interest of the nation and the state,? the chief minister argued and demanded rollback of the duty to 5%.
In his views on the contentious issue, mines secretary S Vijay Kumar wrote to revenue secretary Sunil Mitra on March 21 last saying that export duty on iron ore needed to be calibrated along with incentivisation of pelletisation and also enhancing the agglomeration capacity.
?The export duty on ore fines needs to be calibrated along with incentivisation or pelletisation and unless such capacity came up, any export duty on fines may at best, be oriented towards mopping up of revenue rather than restricting exports,? Kumar said.
He suggested adoption of a strategy for creation of agglomeration capacity to conserve ore, so that fines can be utilised. ?If that is not done, exports will be necessary so that fines do not block the pithead and create environmental problems,? he said and argued that removal of export duties on pellets announced in the last Budget should be positioned as a long-term strategy for creation of pelletization capacity.
The secretary said of the total iron ore production of 208 MT, about 126 MT are fines while the agglomeration capacity is barely 68 MT. In case of Goa as it is as poor as 1.8 MT The existing sinerting facility in the country is 39 MT and pelletisation 28.8 MT. The domestic steel industry, which produces 66 MT of steel consumes nearly 100 MT of iron ore and the low-grade of the mineral is mostly used by the integrated plants, while the sponge iron industry relies heavily on ore lumps, Kumar pointed out.
But the steel industry has been maintaining that continuous export of iron ore would result in India becoming a net importer of the mineral in the near future. The utilities have argued that if exports of the mineral continued the way as is happening now, then the natural resource would last barely for the next 30 years. While mega producers like SAIL and Tata have their captive resources, others rely mainly upon National Mineral Development Corporation or private producers for their steady supply. They have been persistently demanding curbs on ore exports or at least disincentivising it.
Responding to the steel industry?s concerns, the government had imposed the ad valorem duty on both lumps and fines. ?This is a natural resource which needs to be conserved. I propose to enhance the rate of export duty for all types of iron ore and unify it at 20% ad valorem,? finance minister Pranab Mukherjee had said while unveiling the Budget 2011-12.