The government is likely to impose uniform 20% export duty on all classes of iron ore (fines and lumps). In the forthcoming Union Budget, the finance minister Pranab Mukherjee is expected to announce this decision, as there is a growing consensus within the government that in view of the big spurt in the global prices of this commodity, the exporters won?t really find a higher impost unbearable.
For the government, a higher duty would help enhance the tax revenue in 2011-12, a year in which it will have major additional expenditure commitments on account of the food security law and the like.
A 20% across the board levy on iron ore is expected to provide revenue between Rs 10,000-12,000 crore to the government at current global ore prices that are prevailing at high levels of $160-180 per tonne, a finance ministry official said.
The steel ministry has been pitching for maintaining the iron ore reserves to meet the growing domestic demand.
At present, the export duty on iron ore fines is 5% and that on lumps is 15%. The fines, whose domestic consumption is limited, is the main component of exports comprising over 80% of total iron ore going out from the country.
The steel minister Virbhadra Singh has made a strong case for restricting the export of iron ore in his meeting with finance minister Pranab Mukherjee recently. ?We have got quite a big deposit of iron ores but we should not exhaust of it. We have made a case for this,? Virbhadra Singh told FE.
?Besides curbing exports of iron ore and conserving the mineral for the use by the domestic steel industry, a higher duty level will also restrict illegal mining of the natural resources,? said another official in the steel ministry.
The government shifted from fixed duty structure to 15% across the board ad valorem export duty on iron ore in June 2008 when ore prices were at its peak. It, however, had to bring down the duty thereafter reaching 0% levels in 2009 following a slowdown in the economy in wake of global financial meldown. The duty level has subsequently been revised upwards a few times after that to reach the current levels of 5-15%.
Export duty was reduced when market was down and iron ore prices reached an very low levels. There is a clear case for raising duty now with ore prices at an all time high levels and exports maintaining a steady trend,? said an official of a private sector steel company asking not to be named.
India produces about 220 million tonne of iron ore, half of which is exported mainly in the spot markets of China. In 2009-10, iron ore exports reached an all time high level of about 117 million tonne.
Contrary to export figures, the Federation of Indian Mineral Industries (FIMI), feels that higher duty will be detrimental for the interest of the mining industry and further tilt the trade balance in favour of China. ?The iron ore export from the country has already come down. We would not be able to export more than 90 million tonne this financial year,? FIMI secretary general R K Sharma said. The federation is also completely opposed to the steel ministry?s view and would make a representation to finance minister to block any move which restricts export of iron ore.
As per mining industry estimates, the current iron ore resources of about 25 billion tonne is expected to last for next 75-85 years as steel production reaches 200 million tonne (MT) by 2020. The steel ministry estimates, however, puts the deadline much earlier at 35-40 years.