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In a bid to curb iron ore exports, the Union Budget has hiked the export duty on iron ore lumps and fines to 20 per cent ad valorem.
Currently, the iron ore lumps attract an export duty of 15 per cent, while the levy on fines stands at 5 per cent.
“Iron ore is a natural resource, which needs to be conserved. I propose to enhance the rate of export duty on all types of iron ore and unify it at 20 per cent ad valorem,” the Finance Minister, Mr Pranab Mukherjee, said. The statutory rate of export duty on iron ores is being increased from 20 to 30 per cent, while unifying the effective rate at 20 per cent. However, the export of iron ore pellets has been fully exempted from export duty to encourage the value addition process for fines.
Iron ore exporters feel that the move to hike duty would turn counterproductive resulting in increased prices of the commodity in domestic market. “It is a big dampener on the mining industry,” said Mr Siddharth Rungta, President, Federation of Indian Mineral Industries (FIMI).
Shares of Sesa Goa, the largest exporter, hit a 52-week low on the BSE to Rs 260 in the intraday trade on Monday before recovering to close at Rs 262.30, a decline of 7.3 per cent.
“The duty hike will make Indian iron-ore uncompetitive in the international market leading to reduced demand. Further, this would lead to a decline in production, resulting in increased prices,” said Mr R.K.Sharma, Secretary General, FIMI.
The Steel Ministry has for some time now been demanding a duty hike on iron ore exports. Indian iron ore exports for the April-December 2010 period were down 17 per cent to 64.4 million tonnes as against 77.6 million tonnes in the corresponding period previous year.
“Duty exemption on pellets is to focus on encouraging value addition,” said Mr Sanjeev Jain, Executive Director, Ernst &Young. However, the question is who will invest in pelletisation plants – miners or steel plants? This is because the steel companies are being allocated mines on a preferential basis, Mr Jain said.
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