Duty holds up ore exports from east zone

BHUBANESWAR: Iron ore exports from Paradip, Haldia and Vizag have come to a grinding halt from Thursday following the imposition of Rs 300-per-tonne export duty, industry sources said. All the exporters of iron ore have stopped their operation in Orissa, Jharkhand and Andhra Pradesh and have cancelled their ship bookings.

According to information available here, leading exporters like SL Mining, SK Sarawugei, KN Ram, MR Mining, Bagadiya Brothers, Sesa Goa, Core Minerals and Taurian Iron & Steel have cancelled ship bookings in the wake of the Union Budget 2007-08 imposing export duty of Rs 300 per tonne on iron ore and concentrate of all sorts.

Rungta Mines and Sara International, which were engaged in loading iron ore in two ships at Paradip, were the first victims of the new export duty on iron ore export by coughing up Rs 75 lakh and Rs 1 crore respectively. Both the companies had no option but to pay the duties as the ships had already called at the port, source said.

In a letter to finance minister P Chidambaram, the Eastern Zone Mining Association [EZMA] has sought immediate withdrawal of export duty levied on iron ore fines of all grades. “What we understand that Hoda Committee had recommended imposition of duty on +65% iron ore lumps and not on iron ore fines as there is no domestic demand within the country. And moreover, any imposition of export duty on iron ore fines will have a detrimental effect as the entire industry will come to a grinding halt,” the letter said.

The EZMA has also made it clear that as and when the demand for iron ore fines would go up in the domestic market, the members would discontinue exports and sell the fines in the country.

Iron ore come in two forms — iron ore lumps (calibrated ore) and iron ore fines. Both the forms of iron ore are produced together. Out of every 100 tonnes of iron ore produced, 60 tonnes are fines and 40 tonnes are iron ore lumps, which are used by sponge iron and pig iron industry.

No other steel makers in the eastern India other than Steel Authority of India and Tata Steel utilise fines. Both the steel majors have captive mines. Even they are unable to utilise all the fines generated in their mines. Incidentally, SAIL alone has an accumulated stock of 80 million tonnes of fines, which is creating pollution problems. SAIL periodically sells the fines through traders.

“It is a compulsion for us to export iron ore fines as there is no domestic demand for fines.. Moreover, an imposition of Rs 300 per tonne export duty will make all our exports of iron ore fines unviable as the logistic cost in the eastern sector is very high and profit margin is very low in export of fines, contrary to what has been propagated by the steel lobby,” the letter said.

Exporters said they get only $2 [ about Rs 100] per mt and export duty of Rs 300 makes the iron ore exports unviable. Each year, about 20 million tonnes of iron ore is exported from the ports in the eastern zone, fetching the country foreign exchange worth Rs 5,000 crore.

Of late, there has been a spurt in economic activity in the hinterland of Orissa and Jharkhand largely due to mining activities. More than one crore people are directly or indirectly involved with the mining industry. “As the iron ore mining is the mainstay of activity, our decision to stop exports will hit the livelihood of these people,” Manas Daspatnayak, director, PK Ores, told ET on Monday.

“During the last few years, iron ore has seen a boom in its sales. This has led to tremendous spurt in economic activity in Orissa. The levy of export duty will have consequent negative impact on the iron ore industry, and more importantly and sadly, on the struggling citizens of the poverty-stricken state,” said Mr Daspatnayak.

During the last five years, the life style of people of Keonjhar, Sundergarh, Mayurbhanj, Cuttack, Jajpur and Jagatsinghpur districts has undergone tremendous change. This has happened simply because more than 15,000 trucks ply daily from mining industry to the ports of Haldia, Paradip and Vizag, carrying iron ore fines for exports. Barbil, a small town of 50,000 people, now has as many as 50 hotels to cater to the needs of the people connected with iron ore export industry and thus bringing substantial economic gains to the common people.

In a letter to chief minister Naveen Patnaik, Mr Daspatnayak urged him to take up the issue with the Centre. “While Orissa government has been insisting for an increase in royalty on ore, the Central government has found every pretext to stop the same. How has the same Central government not hesitated for a moment before levying a duty which is 2,000% of the royalty rate? If indeed the move is to stop precious minerals exports, why levy customs duty, why not allow the state government to levy additional royalty?”

The letter alleged the role of an industrialist-turned-MP behind the export duty. “It is common knowledge that a big industrial house (having its owner a member of Parliament for the ruling party) had indeed lobbied and written repeatedly during the last six/seven months for a ban on exports of iron ores. This very industrial house has no compunction in irregularly in occupying and running a mining lease in Odisha (in Thakurani hills) to take away the ore in millions mt without any benefits shared with the local population whatsoever,” it said.