The Federation of Indian Mineral Industries has urged the Government to withdraw export duty of 50 per cent on low grade iron ore of less than 58 per cent iron content as it is not used by Indian steel companies.

Late last month, the government had increased duty on iron ore export to 50 per cent from 30 per cent, while levying a duty of 45 per cent on iron pellet export to enhance domestic supply and bring down prices of key raw material in steel making.

In a letter to Finance Minister Nirmala Sitharaman, the Federation said low grade iron ore are kept in the mining lease area as they cannot be used by Indian steel industry or MSME sector. The storage of low grade iron ore hinders production of lumps (high grade ore) and becomes an operational hazard.

‘Exports to get hit’

In iron ore mining, lumps account for only 25-30 per cent and the balance are in the form of fines (below 58 per cent iron content). The prohibitive export duty is akin to virtual ban on export of fines which would lead to prices plummeting.

This will result in lower average selling price declared by IBM based on which premium, royalty and fund flow into district mineral foundation and National Mineral Exploration Trust are decided by the Government, said the letter.

A lower collection of these taxes and levies as well as lower volumes will adversely impact the State revenues and loss of employment, it added.

Five major integrated steel companies account for over 70 per cent of crude steel production and most of these companies meet their iron ore requirement from their captive mines besides selling and exporting fines, it said.

China has been the main market for Indian low-grade iron ore fines. However, owing to softening steel prices, the demand for Indian fines is declining faster than expected. Fines exports has more than halved to 12.83 mt last fiscal against 34.26 mt FY’21.

While large steel companies are completely insulated from any increase in iron ore prices, they benchmark Indian steel prices to that of international markets even as they get high grade iron ore at comparatively lower price, said the Federation.

The large steel companies have taken undue advantage of market conditions to make a windfall profit by frequently resorting to abnormal increase in steel prices, it added.