The Hindu Business Line : Dual duty on iron ore exports

New Delhi May 3 In an attempt to strike a balance between the contradictory demands made by the domestic mining industry and the domestic steel industry, the Finance Minister, Mr P. Chidambaram, on Thursday introduced dual export duty structure for iron ore replacing the flat duty structure introduced by him in this year's Budget.

Fe content

Iron ore fines having iron (Fe) content of up to 62 per cent would now attract Rs 50 per tonne of export duty, a reduction of 83.33 per cent compared to Rs 300 per tonne announced in the Budget speech.

Fines with iron content higher than 62 per cent would, however, continue to attract Rs 300 per tonne, the Finance Minister informed the Lok Sabha today.

Exports

Major portion of the ore with less than 62 per cent Fe content is exported to China by private sector mining companies while the higher grades are exported mostly to Japan and Korea under long-term contracts.

As a result of this new duty structure, while private sector miners would be benefited, public sector mining companies such as National Mineral Development Corporation (NMDC) and others would not get any benefit, PSU officials said.

"Private sector companies mostly export below 62 Fe ore to China in the spot market while PSUs mainly export ores containing 62-65 per cent Fe containing ore to Japan and Korea under long term contracts. Long term prices are around 40 per cent lower than spot prices. So the benefit of lower export duty should have been extended to long term export contracts also," sources in NMDC said.

NMDC would have to absorb around Rs 105 crore during fiscal 2007-08 because of the Rs 300 per tonne export duty it would have to pay on its export of higher grades of iron ore since the company cannot pass on the tax burden to the purchaser under long term contract.

On the other hand the largest private sector iron ore exporter, Sesa Goa, is expected to save around Rs 10 crore on taxes, according to the company sources.

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