While the export duty on iron ore with less than 58% Fe content was removed in the Budget, the steel ministry is set to ask the finance ministry to reduce the duty on ore with higher Fe content too. Currently, the export duty on ore with iron content above 58% is a prohibitive 30%.
A senior steel ministry official said the proposed duty cut would not only help the miners to clear the mine-head stocks which now stand at an all-time high of around 150 million tonne (mt), but also keep the current momentum of production.
Export duty on iron ore, both lumps, or higher grade, and fines, or inferior grade, were nil before the UPA government imposed duties to gradually take them up to 30%, with the aim of preserving the raw material in the country for future use. Coupled with a Supreme Court-imposed export ban, the higher duty led to exports nosediving to just 6.12 mt in 2014-15 from 117.3 mt in 2009-10.
India used to export iron ore mostly in the form of fines to China, the highest consuming nation, for want to sufficient consumption within the country. The share of India in iron ore export to China came down to 20% in 2008 to less than 0.5% in 2014. The government, with effect from April last year, had reduced the export duty on ore containing less than 58% iron to 10% from 30% earlier.
While the steel ministry’s plea to revisit the proposal to reduce duty on higher-grade iron ore exports would cheer domestic miners, the steel industry would not be happy, as it might lead to a price escalation for them. It generally takes 1.6 mt of lump ore to produce each MT of steel.
Even in normal times, domestic production of iron ore is higher than domestic demand, resulting in continuous addition to the stockpile of iron ore year after year. Since demand has almost shrunk and there is hardly any place in the mines, a situation is approaching when the industry has to go for reduction of production which will lead to job loss,” Federation of Indian Mineral Industries wrote in a March 2 letter to the mines ministry.
Steel industry officials, however, said there was a pressing need in the country to preserve the raw materiel for future use.