In a sign of support for the steel industry, the government has hiked the duty on all variants of iron ore. The move comes on the back of rising appeals to conserve India's domestic iron ore reserves for the anticipated boom in domestic steel demand, with capacities expected to double over the next three years.

Sajjan Jindal, head of JSW Steel, said “The hike in export duty for iron ore fines and lumps is most welcome, while the move on pelletisation will lead to greater value-addition at home and encourage the domestic steel industry.” JSW Steel depends on external sources for a large portion of its raw material needs.

Mr H.M. Nerurkar, Managing Director, Tata Steel, which is self-reliant for iron ore, said the increase in export duty on iron ore exports will encourage value addition within the country, which is a step in the right direction. “However, exemption of duty on pellets will reduce the scope for greater value-addition within the country, as the value addition at the pelletisation stage is much less compared to finished steel. The aim should have been to encourage steel production in the country, which would lead to more jobs,” he said.

In the aggrieved corner, are the iron ore miners whose woes following the Karnataka export ban are now compounded by the 20 per cent export duty. India is the third largest exporter of iron ore with over 50 per cent of over 200 million tonnes of iron ore mined domestically destined for China, Japan, South Korea among other countries.

“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.

Indian iron ore exports for the April-December 2010 period were down 17 per cent compared to the previous year. Iron ore exporters feel that the move to hike duty would turn counterproductive resulting in increased prices of the commodity in the domestic market.

“It is a big dampener on the mining industry,” said Mr Siddharth Rungta, President, Federation of Indian Mineral Industries (FIMI).

“Duty exemption on pellets is to focus on encouraging value addition,” said Mr Sanjeev Jain, Executive Director, Ernst & Young.

But 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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