MoF to datamine iron ore export tax impact

NEW DELHI: A review of export tax on iron ore is on the cards. North Block has asked mining companies to provide financial details of their businesses to study the impact of the recently-imposed export duty on iron ore.

The mining industry has been lobbying hard for removal of the duty, alleging it has made Indian ores uncompetitive in the international market. The companies had represented to the finance ministry after the export duty was announced in Budget 2007. The industry is especially pressing for waiver of duty on export of low-grade iron ore — with less than 64% iron content — that does not command a premium in the international market.

The ministry has asked the mining companies to furnish details about their financials, including production data and sales. An official said the ministry was willing to examine the issue and see how the duty was impacting the competitiveness of low-grade iron ore internationally. As per the data available with the ministry, domestic iron ore was still quite competitive.

Coming out in support of the mining industry, the mines ministry has written to the finance ministry, seeking a review of export duty on iron ore. As per mines ministry’s views, imposition of duty on iron ore export would lead to decline in export to the extent of 40-50%. It says the imposition of duty at Rs 300 per tonne would lead to an increase in prices by $7-8 per tonne internationally, making them uncompetitive compared to ores from Brazil and Australia. In fact, the mines ministry has called for a discussion on the issue in the group of ministers (GoM) on mineral policy also.

China, the largest importer of iron ore from the country, raised the issue during finance minister P Chidambaram’s recent visit to the country. Chinese importers had taken up the issue with commerce & industry minister Kamal Nath as well. A Chinese mining association also threatened to boycott Indian ore if the duty was not withdrawn.

Indian ore accounts for almost 20% of total iron ore imported by China. For India, the Chinese market accounts for over 80% of the total exports of 95 million tonnes of ore.

The government’s proposal to levy export duty, however, has been hailed by the steel industry that wants the raw material should be conserved for value addition within the country and not exported to feed the industries of other countries. The steel industry has also said that operating profit of mining companies are over 85% which is highest in any industry segment.