The Hindu Business Line : There was no consensus on iron ore export duty proposal

The proposal
Finance Ministry was keen that the export duty on iron ore be imposed at 15% ad-valorem.
Since there was no consent from the Commerce and Mines Ministries, it was removed from the Budget.

Phalguna Jandhyala

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New Delhi, March 4

The Steel Ministry’s proposal of imposing export duty on iron ore on an ad-valorem basis in place of the current specific rate of customs duty though was accepted by the Finance Ministry, did not go too well with the Prime Minister’s Office (PMO).

According to a senior Government official, the issue was taken up at a pre-Budget Cabinet meeting a couple of days before the Budget was to be tabled in Parliament and since there was no consensus on the matter especially from the Commerce and Mines Ministries, it had to be removed.

“The Finance Ministry was keen that the export duty on iron ore be imposed at 15 per cent ad-valorem. But since there was no consensus on the issue, the Prime Minister intervened and asked the proposal to be removed from the Budget till a consensus was reached,” the official told Business Line.

Even, Finance Minister, Mr P. Chidambaram, in his post-Budget press conference admitted that since there was no consent from the two Ministries on the matter, the export duty on iron ore was not tinkered with and the Government decided to continue with the specific rate of duty that was imposed last year.

According to officials in the Steel Ministry, since the imposition of an export duty of Rs 300 per tonne during the current fiscal, the spot prices of iron ore had undergone a significant change. The Ministry also felt that since there have been cases where in higher grades of iron ore (iron content in the ore is above 62 per cent) was blended with lower grades to pay a lower export duty of Rs 50 per tonne, an ad-valorem duty instead of the current specific rate of customs duty was the best way to address the issue.

The official also said that there was a thinking in the Government that the existing duty of Rs 300 on high grade ore and Rs 50 on the low grade be done away within this year’s Budget.

“But this was not accepted by the Finance Ministry as apart from the loss of the natural resource, there would also be a huge loss to the Government’s exchequer,” the official pointed out.

He added that the Ministry decided to impose a 15 per cent ad-valorem duty rate as it would contribute close to Rs 17,000 crore to the Government’s exchequer.

The Government is also concerned that if the iron ore exports continue in the same manner then in a couple of years the domestic steel companies will have to import the ore.

“India was self-sufficient in chrome and manganese ore, but exports over a long period of time have finally forced the domestic industry to import both the ores. This could be the same fate that iron ore will face if the exports are not reduced in the next couple of years,” he said.

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