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Iron ore exports face curbs as govt looks to protect crisis hit steel makers |
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In what appeared to show its intent to impose fresh curbs on iron ore exports in the interest of domestic steel makers, the government has placed the policy regime for the mineral under a comprehensive review. “We will set up a committee, as per the direction of the NITI Aayog, to look into the iron ore issue. It would be discussed threadbare in the coming weeks. We want the interest of the steel industry to be protected first and it should get iron ore at affordable prices,” a senior steel ministry official told FE on condition of anonymity.
Riding on robust Chinese demand, India’s iron ore production and exports had peaked at 218.5 million tonnes (mt) and 117.4 mt, respectively, in 2009-10. Both production and exports have since declined due to a crackdown on illegal mining and curbs placed on exports, while demand from China has also waned during the period.
While a 5% export duty on iron ore fines had existed for long, it was raised to 20% in March 2011 and further to 30% in December 2011. Following a series of representations from the iron ore industry, especially producers in Goa, the export tax was reduced to 10% for ore below 58% iron content in the last Budget.
The government’s latest move is despite local steel makers already enjoying substantial protection from imports in the form of import duties on all items as well as anti-dumping duties and minimum import price for select products.
The Economic Survey had said further protection would impact downstream industries. Stating that the domestic steel industry, with higher borrowing and raw material costs and lower productivity, is at a comparative disadvantage and appreciating the measures taken to curb surging imports of steel, the survey noted: “Any further safeguards will impact downstream industries as steel is used as an input in different industries like basic metal and non-metal products, machineries, transport, construction and consumer goods.”
“It is estimated that for a 10% increase in steel prices due to a hike in anti-dumping or import duties, the cost of production of basic metal and non-metal products will increase by 5.4%. Besides, cost of production in construction sector will go up by 1.7%, machinery by 1.3%, transport by 0.7% and the consumer goods sector by 0.4%,” it said.
While primary steel makers have reported decline in profitability over the pasty year, public-sector SAIL reported heavy losses. With the help of the MIP and the dumping duties which put a lid on cheaper imports, the steel makers have of late started to look up.
The steel ministry official quoted above did not spell out the likely steps to be taken to ensure “adequate supply” of iron ore in the domestic market but sources said options available are either raising export duties or putting a cap on outward shipments of the mineral.
Iron ore exports gradually fell to 97.66 mt in 2010-11 to 61.74 mt in 2011-12 and then plunged to 18.37 mt in 2012-13, 14.42 mt in 2013-14 and further to 6.12 mt in 2014-15.
The steel industry, according to industry sources, had been under tremendous pressure till the import tariffs were raised owing to weak demand, subdued prices and large-scale imports from surplus countries such and China, Japan and South Korea.
JSW Steel’s commercial director Jayant Acharya said, “The availability of iron ore and the right pricing is always a problem being faced by the domestic steel industry. That is why we resorted to imports.”
However, the Federation of Indian Mineral Industries’ secretary general RK Sharma, said: “With 183.51 mt surplus iron ore at the end of the last fiscal, the question of inadequacy does not arise at all. Where are the exports? It has come down to 5.32 mt in 2015-16 compared with 117.37 mt in 2009-10.”
Source : financialexpress.com
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