Iron ore exporters remain worried lot.

Iron ore exporters are a worried lot these days. Their cause of concern is not the price movement of the commodity in the international market, rather the active discouragement of Indian government to export the ore.
 
Steel secretary had gone on record saying the ministry would like to see a 20 per cent tax on iron ore exports. Last December, the government had raised export duty on iron ore lumps to 10 per cent from 5 per cent earlier and on iron ore fines to 5 per cent.

“Instead of giving mining leases to new steel mills, government should encourage new steel facilities to use iron ore fines in steel making,” R K Sharma, secretary general of Federation of Indian Mineral Industries (FIMI), said.

Indian steel companies use iron ore lumps to manufacture steel and most of the iron ore fines are exported from India. As the country produces around 220 million tonne of iron ore of which around 105-110 million tonne are exported, iron ore exporters may have a tough time going ahead if any tax hike happens.

“Firstly, iron ore exporters don’t have an option than to export as there is no demand for iron ore fines in the domestic market. Secondly, price variations for iron ore in the domestic and international market is so high that miners resort to exports for a higher price,” Sharma said.

Indian iron ore exporters now get $140-$150 per tonne for high grade iron ore i.e. 63.5 per cent grade on FOB basis. Iron ore fines also get good prices in the international market. This sudden surge in price is due to the rising demand from China.

“Low grade iron ore fines with iron content ranging from 40 per cent to 55 per cent iron content are produced from Goa. These fines have absolutely no use for Indian manufacturers as they use high grade ore. So, India should exempt fines from taxation, Glenn Kalavampara, secretary of Goa Mineral Association said.

He also said that depletion of iron ore reserve due to exports was misleading as use of iron ore fines had increased the past estimate of reserve in the country.

Further, recent railway freight hike on iron ore by Rs 300 has also burdened the exporters.

Iron ore is one of the key revenue generating component for many states like Goa, Orissa, Karnataka, Jharkhand and Chhattishgarh. While states like Orissa gets around Rs 1,000-1,500 crore from iron ore mining, Karnataka receives more than Rs 200 crore from this mining activity. As these states earn such revenues on the back of exports, any change in duty structure will adversely affect state coffers.

However, domestic steel companies have a different view on this matter.

A top executive of Tata Steel said, “With a target of 8-9 per cent GDP growth in next few years, Indian steel manufacturing needs to grow in the range of 9-10 per cent, which will be around 150-200 million tonne steel in next 10 years. So, India needs to conserve its iron ore reserve to support such growth in future.”

As one tonne of steel manufacturing needs two tonnes of iron ore, the demand for iron ore will be huge in future, he said. Referring to proposed Mines and Minerals (Development and Regulation) Act, he said that though government was planning to restrict private and foreign companies for mining in tribal areas, the intention was to encourage serious players.

Draft document of proposed Mines and Minerals (Development and Regulation) Act seeks to restrict mining in tribal areas by private and foreign companies.

Source : Business Standard