In a move that will deal a blow to merchant miners and have a benign impact on inflation, which touched 8.75 per cent today, in the long term, the government today imposed a 15-per cent ad valorem duty on iron ore exports. The hike will help it rake in Rs 8,000 crore to Rs 10,000 crore in a year and partially offset the Rs 22,660 crore hit it took following duty cuts on crude oil and fuel products earlier this month. Export duty on iron ore was so far levied at specific rates. While lumps and fines with iron content over 62 per cent attracted a duty of Rs 300 per tonne, the duty on fines with iron content up to 62 per cent was Rs 50 per tonne. A 15 per cent ad valorem duty on all iron ore exports is expected to address the demand-supply gap in the domestic steel industry by increasing its availability to companies at better prices for their proposed capacity addition plans. Iron ore exports have zoomed in the last four years from 75 million tonnes in 2004-05 to 102 MT in 2007-08. Among those who will be hit by the duty are the miners of Bellary who are riding the export boom—including the Reddy brothers who reportedly bankrolled and facilitated the BJP’s electoral victory in several Karnataka districts.The government also hiked the export duty on long steel products such as reinforcement bars and structural steel to 15 per cent from 10 per cent. This will also have an effect on the rising costs in the domestic construction industry. Giving some relief to exporters of flat steel products used for making specialised components in the automobile and engineering sectors, the 15 per cent export duty has been rolled back. This decision comes following the Committee of Secretaries’ recommendation that since steel prices had dropped 10 per cent, exporters of specialised products should not be penalised. At a meeting chaired by Cabinet Secretary K M Chandrasekhar on May 30, the CoS agreed to the Steel Ministry’s proposal on rolling back the export duty on flat steel products after observing that steel companies cut prices by Rs 4,000 a tonne and promised the Prime Minister to hold the price line for three months on May 7. The government had imposed a 15-per cent export duty on semi-finished products and hot rolled coils/ sheet, 10 per cent on cold rolled coils/ sheets, pipes and tubes and 5 per cent export duty on galvanised steel in coil/ sheet form. The decision came after the steel makers repeatedly hiked prices citing the uptick in international prices. Endorsing the government’s concerns on inflation in their meeting with the Prime Minister, top steel companies including Tata Steel, Essar, JSW and Jindal offered to reduce prices and assured that the domestic demand-supply mismatch would be bridged. Between January and April this year, pig iron prices jumped over 70 per cent, construction steel such as TMT and wire rods by over 36 per cent and HR coils by more than 40 per cent. The tug-of-war between the steel industry and the ministry has been on since February. After failing to convince producers to roll back prices, Steel Minister Ram Vilas Paswan wrote to the Prime Minister asking him to consider imposing export duty on steel, abolishing import duty and doing away with export incentives. The government subsequently withdrew DEPB benefits for steelmakers. The top brass of the ministry held several rounds of meetings with steel producers to convince them to reduce prices.
