The Hindu Business Line : Tariff on iron ore for export doubled

THE Railway Minister, Mr Lalu Prasad, has indirectly responded to the long-standing demand of the domestic steel industry to curb iron ore exports by announcing a dual freight policy for this mineral. But even as some domestic steel manufacturers feel that more high quality ore may be available in the domestic market now, some experts feel that the enhanced freight would have only a marginal impact on iron ore exports.

The dual freight policy is based on categorising iron ore on the basis of the end use of the ore. Under the new policy, the freight rate payable for iron ore being transported to the ports for exports would be almost double compared to the freight payable for ore being taken to the steel plants.

The Railway Budget stated that the classification for iron ore traffic for steel plant sidings would continue at the earlier classification of 140 basis points. However, the classification for all other traffic in iron ore is proposed to be revised from 140 to 160 basis points. The new rate for iron ore would mean that for transporting one tonne over a 100-km distance, a steel plant would have to pay a tariff of Rs 25.02. However, if an exporter transports the same one tonne ore over 100 km to a port, the rate will be Rs 50.04. The corresponding rates for a 250-km distance would be Rs 49.77 and Rs 99.54, respectively. In other words, the higher freight rate is expected to impact the profitability of iron ore exports.

However, according to Mr A.S. Firoz, Chief Economist of the Joint Plant Committee of the steel industry, there would not be any impact on iron ore exports since the increase is not comparable to the increase in international prices of iron ore.

"Iron ore prices have increased substantially and would more than offset the rise in freight. Moreover, as a percentage of the price of the ore, this rise would be small and exporters may be able to absorb it quite easily," Mr Firoz said.

On another front, the budget has reduced the freight rate for stainless steel by almost 50 per cent by bringing down the freight rate from 240 to 180 basis points.

Appreciating the budget, the Director of Essar Steel, Mr P.R. Dhariwal, said the freight reclassification from a whopping 4,000 to a mere 80, the ending of Concor monopoly, the new warehouses proposed, modernisation of stations, rationalisation of freight movement were all essential steps for revitalising railway and associated industrial sector. Commenting on retaining the freight for steel plants, the Chairman of Steel Authority of India Ltd (SAIL), Mr V.S. Jain, said: "We are happy that there is no change in tariff so far as SAIL is concerned, considering the two previous upward revisions in freight classification carried out in October and November last year which had an impact of about Rs 150 crore annually on SAIL. We are also happy that there has been reduction in the number of freight classification. This will help to rationalise and simplify the goods tariff."

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