Duty hike on iron ore will not squeeze industry margins: NMDC

PTI New Delhi | Updated on March 02, 2011

MrRana Som , Chairman and Managing Director of NMDC. (file photo)   -  The Hindu

The country’s largest iron-ore miner NMDC has said the hike in export duty on raw material to 20 per cent will not hamper the profitability of the industry, including the Navratna firm, to a big extent.

“Basic purpose of the imposition of duty is to discourage iron ore exports. So, certainly it will dip in the profits for the industry in general, but I believe that the margins will not be that bad for the industry,” the NMDC Chairman, Mr Rana Som, told PTI.

Explaining that the current market prices of the raw material are hovering between $160-180 per tonne, Mr Som said that domestic producers will still be left with a margin of about $40-60 per tonne after paying all duties, royalty and freight charges.

“The move will definitely knock off the profits of the industry players, but not to a very big extent,” he said.

The Finance Minister, Mr Pranab Mukherjee, in the Budget for 2011-12, had fixed a uniform export duty of 20 per cent on all types of iron ore, which is a vital steel-making raw material.

Before the Budget announcement, the export of iron ore lumps attracted a duty of 15 per cent, while the duty on iron ore fines was 5 per cent.

According to industry body FIMI, iron ore exports will fall by 35 per cent annually due to the increase in duty, thereby leading to lower domestic production and a rise in prices.

“Because of the hike in export duty, no fresh contracts are signed now... Only earlier contracts are being honoured.

This would lead to lower domestic production of the raw material, resulting in an increase in price,” the Federation of Indian Mineral Industries (FIMI) President, Mr Siddharth Rungta, said.

About the impact on NMDC, Mr Som said, “We export only about 10 per cent of our production and our main production is iron ore lumps, on which duty has been hiked by only about 5 per cent. So the impact will be very marginal on us.”

The Navratna firm, which accounts for 15 per cent of the country’s total iron ore production, has targeted a 25 per cent increase in output to about 30 million tonnes in the ongoing fiscal.

The company exports around 3,000,000 tonnes to Japanese mills and 400,000 tonnes to Korean steel maker Posco, while the remaining stock is sold in the domestic market.

Published on March 02, 2011

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