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Vedanta is stepping up efforts to reduce operational cost to keep iron ore mining in Goa viable. Mining has come under stress with the price of ore, with 56 per cent iron content, being mined in Goa has now plunged to $32 a tonne from $140 a tonne few years ago. The payout for taxes and levies is adding to the costs.
Speaking to BusinessLine , Kishore Kumar, CEO, Vedanta (Iron Ore Business), said while the price of ore has dropped, the cost has been on a steady rise. About 40 per cent of Vedanta’s revenue goes to paying government taxes and levies. “Of the realisation of $32, about $14 goes to the Government as taxes and levies and the cost of production is $20 per tonne,” he said.
The Government is yet to consider Goa miner’s appeal to remove the 10 per cent export duty on low grade iron ore being mined from the State.
When asked why the company should continue mining if it is incurring a loss for every tonne of ore mined in Goa, Kumar said the company has commitments including salary obligation for over 2,000 employees and interest payments on ₹2,500 crore loan.
The freight cost in Goa is 20-30 per cent higher as transport operators in other Sates are allowed to work for 12-18 hours a day, while in Goa they are allowed to ply only for 10 hours a day, thus, making more trips to transport the same quantity, said Kumar.
Brazil and Australia is fast eating into Goa’s share of iron ore market in China due to lower cost and currency advantage. While rupee has depreciated by about 10 per cent, the currencies in Brazil and Australia are down 30 per cent against the dollar making them more competitive than India in the export market, said Kumar. The Goa government auction to sell 7-8 million tonnes of iron ore has met with little success as domestic steel plants find it cost-effective to import from Australia than shipping the low grade iron ore from Goa.
The Government has recently reduced export duty on high grade iron ore to 10 per cent from 30 per cent, so that NMDC can sustain export.
“Given the sharp fall in prices, we only hope the Government removes the import duty completely as the scope to reduce cost for Goa iron ore miners is limited,” said Kumar.
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