The Hindu Business Line : Iron ore exporters may face Rs 4,600 cr extra duty burden

New Delhi, April 20 There could be an additional burden of over Rs 4,600 crore in the form of export duty on iron ore in case the Government adopts the Steel Ministry-proposed “revenue neutral” model to bring down steel prices.

The model, proposed by the Steel Minister, Mr Ram Vilas Paswan, suggests reduction of excise duty on steel products from 14 per cent to 8 per cent and recovering the shortfall through additional imposts on iron ore exports.

According to the latest full-year excise collection data available with the Government, during fiscal 2006-07, when excise duty on steel was 16 per cent, the top-10 steel producers had paid Rs 12,392.03 crore as excise duty.

In this year’s Budget the rate has been cut to 14 per cent.

Assuming that the level of production prevalent in 2006-07 is maintained, and without factoring in the price rise during last fiscal, at 14 per cent duty rate the excise receivable from these companies would have been Rs 10,843.03 crore in the current fiscal.

If the excise rate is brought down to 8 per cent, the Government would receive Rs 6,196 crore, thereby leaving a gap of Rs 4,647 crore which could be compensated by a 15 per cent export tax on iron ore, according to the Steel Ministry.

At a meeting held on April 15 between the Finance Minister, Mr P. Chidambaram; the Steel Minister, Mr Ram Vilas Paswan; the Commerce Minister, Mr Kamal Nath, and the Mines Minister, Mr Sis Ram Ola; the Finance Minister had said his Ministry is open to excise duty cut in steel but insisted that the loss in revenue on account of steel should be compensated by some other means.

It was at this point that the urgency to bring down raw material costs of steelmaking inputs was felt and imposition of ad-valorem tax on iron ore exports had been discussed.

But the Ministries of Steel, Mines and Commerce differed on this issue and, as a result, no unanimous decision emerged from the meeting.

The Steel Ministry has submitted the views of all the Ministries to the Prime Minister’s Office, which would now have to take the final call, sources present at the meeting said.