FM overshot Hoda panel’s proposal on iron ore duty

Finance minister P Chidambaram’s move to levy an across-the-board Rs 300 per tonne duty on iron ore exports is only partially in accordance with the Hoda Committee recommendations...

Finance minister P Chidambaram’s move to levy an across-the-board Rs 300 per tonne duty on iron ore exports is only partially in accordance with the Hoda Committee recommendations, which the FM had cited to defend the measure. The Hoda Committee was the high-level panel set up by the Union government to formulate a National Mineral Policy.

“We have taken a leaf out of the Hoda Committee report, in which a duty had been recommended on iron ore exports. The intention is to preserve the natural resource for our domestic industry,” Chidambaram had said in defence of the duty, which has been severely questioned by the country’s mining industry.

The actual language of the report, however, was quite categorical. “By way of abundant precaution, the Committee recommends that an export duty may be levied on exports of iron ore in lump form with Fe (iron) content above 65 per cent.”

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Had Chidambaram limited the duty to this segment, the estimated revenue generated would have been just Rs 60-75 crore. But by choosing to levy the duty on ore exports across-the-board, he has ensured that the estimated revenue generation is a whopping Rs 3,000 crore (at current level of exports).

The duty is expected to hit the mining industry hard.

Interestingly, neither the steel nor mining industries, which have been at loggerheads on the issue, have expressed any problem with the Hoda Committee recommendations. The steel ministry’s recommendations have been in line with the panel, with steel minister Ramvilas Paswan agreeing on repeated occasions that the interests of the mining industry, too, should be accommodated.

“Our recommendations were to restrict the export of high grade iron ore. The finance ministry has acted on its own accord and we welcome the duty as a step in the right direction. We realise the importance of the mining industry as well and, hence, we had no problems with export of unutilised iron ore fines,” Paswan said.

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“We have requested the finance ministry to re-look into the matter and levy the duty only on high grade iron ore lumps. Most ore mined is in the form of fines. If it is not allowed to be exported, it would create a problem of surplus in the country,” said Rungta Mines president Siddharth Rungta.

“It is clear that the duty has not been levied on the basis of the Hoda Committee report. The duty has made exports unviable and if it is not revoked soon, the industry will be finished,” said Federation of Indian Mineral Industries secretary general R K Sharma.

India exported 89 million tonnes (MT) of iron ore in fiscal 2005-06 and the figure is expected to touch 100 MT in 2006-07. High grade iron ore lump exports account for only 2-2.5 per cent of the exports while 84 per cent is in the form of fines. China and Japan are the major importers.

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