July 11, 2008 12:49:27 am
Making a strong case against banning iron ore export, the Mines Ministry has opined that such a move could stifle growth of the sector. It could also discourage FDI and result in closure of mines, rendering lakhs of workers unemployed.
“The Ministry opines that a ban on iron ore exports would adversely affect prices and retard growth of the sector. It would be inappropriate for the government to make a trade policy intervention which augmented profitability of one sector and lowers that of another. Restrictions on exports of any mineral would constitute a further disincentive for the flow of FDI in the mining sector at a time when the country needs it most for exploration,” a senior Ministry official told The Indian Express.
The Ministry’s assertions come days after the Steel Ministry understandably suggested to the Committee of Secretaries banning export of iron ore as an option to contain prices. The Ministry is also believed to have favoured enhancing export duty to more than 20 per cent from the current 15 per cent ad valorem.
If exports are restricted then the mining sector would become vulnerable to two risk propositions. Exports accounts for 50 per cent of production and when the market shrinks due to restrictions, limited local demand would result in marginalising profitability.
Also, fall in prices will lead to deprivation of the plough back surplus of the sector, which means that lower profits of mines will drive investment away from exploration and mining, the official said.
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