The Hindu Business Line : Iron ore exporting cos to go in for a higher price from importers

New Delhi, Sept. 16 The major companies exporting iron ore from the country, MMTC and the National Mineral Development Corporation (NMDC), would go in for a higher realisation from iron export when they negotiate the supply contract with Japan and South Korea.

This was decided at a meeting of the Committee of Secretaries chaired by the Cabinet Secretary, Mr K.M. Chandrasekhar, to sort out the difficulties encountered by national mineral companies in the face of the levy of export tax of 15 per cent announced by the Government in order to make the domestic availability of the raw material for steel companies affordable at a time when steel prices do not show any let-up in their rise.

Highly placed sources in the Government told Business Line here that since the Australian iron ore companies have obtained a 96.5 per cent hike in their iron ore price from the importing countries, Indian companies too should negotiate with the Japanese and South Korean companies using this as a floor price to cushion the impact of export levy and spurt in freight cost for the iron ore producers.

They said as these companies renegotiate with their importing companies in Japan and South Korea this year around, they should get a minimum of 96.5 per cent hike as compared to the realised sale price last year.

MARGINS SQUEEZED

The sources said in recent times domestic steel companies have been clamouring for a hike from the 15 per cent ad valorem export duty slapped on the iron ore industry as a measure of additional resource mobilisation to 35 per cent in a bid to slow the exports of ore and ensure supplies in the domestic market.

The steel industry contends that its profit margins have been severely squeezed by the escalating prices of raw materials such as iron ore and coke, as well as the Government’s constant efforts to hold prices to help combat inflation.

As against the plea of the domestic steel industry for a hike in iron ore export duty, the Union Commerce and Industry Minister, Mr Kamal Nath, has sought the intervention of the Prime Minister, Dr Manmohan Singh, demanding that the Revenue Department should make a comprehensive view of the aggregate revenue gleaned by the Government through all other levies on iron ore, including rail freight, to realise how much iron ore export is taxed. He even suggested that the Revenue Department could ask the Railways to partake a part of its resource mobilisation “instead of bleeding the iron ore export industry”.

However, iron ore export companies are of the view that “they have got a fixed margin and even the rupee depreciation does not help if the export duty on iron ore is going to be increased”. So faced with the choice of helping the exporting companies and to safeguard the domestic steel industry from getting into a tight situation, the Government has the only option of directing the ore exporting firms to seek a higher price using the competitor’s higher price realised this year as the floor price for wresting the best price for the Indian iron ore.

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