A pick-up in iron ore export volumes this fiscal and better export realisation have prompted the Finance Ministry to raise the export duty on iron lumps from the current 5 per cent to 10 per cent.
The Government has also slapped a 5 per cent export duty on iron ore fines. The move, which has come at the behest of the Steel Ministry, is being seen as a small victory for domestic steel makers struggling for the raw material. Iron ore is a key input in the manufacture of steel.
The latest move to hike export duty will also bring in more revenues for the Centre, sources in the Finance Ministry said.
The Government had reduced the export duty on iron ore from 15 per cent (in June 2008) to 8 per cent last year before doing away with it on fines, retaining a 5 per cent levy on lumps.
Exports in 2009
In April-October 2009, India's iron ore exports grew 21 per cent to 53.23 million tonnes compared to 44.06 million tonnes in the same period last year.
There has also been an improvement in spot prices of iron ore in China this fiscal due to increased off take of Indian ore by Chinese steel mills, leading to higher export realisation for Indian exporters of iron ore.
The Finance Ministry has, however, rejected the Steel Ministry's suggestion for having uniform export duty of 15 per cent on all iron ores, lumps or fines. It has decided to maintain a five percentage point duty differential between fines and lumps.
The Government wants to discourage exports of lumps, but it is not averse to increased exports of fines, official sources said.
Pressure on Margins
Mr Rana Som, Chairman and Managing Director of NMDC Ltd, told Business Line that the international spot prices of iron ore remain very high and that the revenue reasons could have prompted the Government to hike export duty.
He, however, admitted that export margins could come under some pressure on account of the hike in the export duty. In 2008-09, India's iron ore exports increased 0.4 per cent to 104.7 million tonnes.
But in dollar terms, exports fell 25 per cent to $ 4.37 billion from $5.83 billion the previous year.
The exports fell in value terms mainly due to the price cuts taken to win customers in China, which is the world's largest buyer of iron ore.
India is the third largest exporter of iron ore. The country produces about 200 million tonnes of iron ore, of which about 50 per cent is exported.
Nearly 80 per cent of India's iron ore exports goes to China and the balance to South Korea and Japan.
Source : Business Line