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The Finance Ministry may remove import duty on iron ore lumps, fines and pellets. If this happens, it will benefit steel companies such as Bhushan Steel and Essar Steel.
Iron ore imports at present attract a duty of 2.5 per cent. The industry had pitched for the removal of this duty in their pre-Budget submission, but that has not materialised so far.
“The Steel Ministry had written a letter seeking removal of the duty. It is under active consideration,” a senior Finance Ministry official said. The development assumes significance because the Supreme Court-imposed mining ban in Karnataka and Goa and the regulation of mining by the State Government in Odisha, which has severely affected the availability of iron ore for the steel companies.
As a result, few companies like Bhushan Steel and Essar Steel have been importing iron ore. “The quantum of imports is negligible compared to the domestic output, but it is not tracked,” said Mr R. K.Sharma, Secretary-General of Federation of Indian Mineral Industries (FIMI). “There is no shortage of resources or capacity, but the lack of outlet for fines through exports is also affecting the production of lumps,” Mr Sharma said.
Export duty
The Finance Ministry official also added that when the export duty has been hiked from 20 to 30 per cent, there is no need for import duty.
The increase in export duty has brought down exports to around 60 million tonnes in 2011-12, from 98 million tonnes in the previous year. At the same time, the rise in domestic price has made things difficult for steel makers even when the exports are down.
The industry has said that there is still a dearth in supply of raw material. This has affected most of the steel plants that are dependent on open market for iron ore, resulting in lower capacity utilisation. It also believed that import duty on iron ore adds to the disadvantages of steel industry as the import route is already considerably expensive. Levying it to discourage imports is largely an anomaly in the duty structure, it explained.
GDP growth
According to Assocham, a nine per cent growth in GDP will create demand for 113 million tonnes of steel and 206 million tonnes of iron ore by 2016-17, as the country embarks on several infrastructure projects. The iron ore production in 2011-12 stood at close to 170 million tonnes, down from 208 million tonnes produced in the previous year.
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