The Hindu Business Line : Commerce Ministry not in favour of banning iron ore, steel exports

New Delhi, April 17 Having backed the ban on export of non-basmati rice to the hilt and moderated the export of basmati rice by pitching for a higher minimum export price, the Commerce Ministry appears to be digging its heels on the contemplated export ban on iron ore and even on iron and steel.

Highly-placed sources in the Government told Business Line that while it is politically expedient to restrict export of mass consumption items like rice by moderating or banning its exports lest the food security of the country should be in jeopardy, the same is not the case when it entails the prestige of the country as a reliable supplier for overseas markets, which also gives higher export receipts in the wake of boom in commodities in general and in metal and mineral prices in particular.

The sources said that at the last inter-ministerial meeting of senior officials there were differences over reduction of excise duty on steel from 14 to 8 per cent with the Finance Ministry reluctant to toe the line, while the Commerce Ministry voiced its vexatious concern over slapping any ban on export of iron and steel in general and iron ore in particular.

Augmented exports

The sources said that export of iron and steel has augmented markedly last fiscal at slightly over Rs 50,000 crore against Rs 25,000 crore in 2006-07, based on provisional figures. This excludes the exports of articles of iron and steel which have fetched around Rs 37,000 crore from Rs 15,000 crore in the same span.

Since 20 per cent of the country’s production gets exported, there is a tacit recognition to ensure that domestic availability is assured first as supply shortage has led to spurt in steel prices in the country. The sources said that imports could not be any answer as the international prices were ruling far higher than the domestic sale prices of steel and steel products.

That is why the Commerce Ministry underpins measures to cut down customs and excise duty but not an outright ban on export of these items from India. However, it has reportedly plumped for an export duty of at least 10 per cent on these products, on the premise that even a conservative estimate puts the revenue receipt from such duty in the range of Rs 4,000 crore plus.

Already, there is a considerable revenue accrual to the exchequer due to the withdrawal of Duty Entitlement Pass Book (DEPB) benefits to steel exports.

Duty impact

Even as the Commerce Ministry argues that such export duty on steel would have a moderating influence on the indigenous prices of steel which in turn would cause decrease of iron ore prices for the domestic steel producers, trade policy experts say that imposing taxes would rob incentives for domestic producers besides pushing global prices.

Incidentally, MMTC is the biggest supplier of iron ore from India, particularly to China and Japan, and the Commerce Ministry is of the view that with heightened production and availability of iron ore from Australia and Brazil this year, India’s spot prices in the Chinese market would be under some pressure before long and any step proposed to be made should not ignore this fact, the sources added.

On the issue of any similar attempt to slap export duty on iron ore or slapping any restraints on the export of iron ore, the Commerce Ministry disfavours them as not being “in the best interest of our country”, stating that imposing export duty on iron ore would only exacerbate the price of lumps mostly used by domestic industry and push the price of steel produced in the country, leading to further inflation.

They argued that India’s export of ores and minerals which was Rs 21,052 crore during April-December 2006 rose to Rs 22,711 crore in the corresponding three-quarters of 2007, accounting close to five per cent of the country’s total exports.

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