To curb illegal mining,govt hikes export duty on iron ore to 30% ad valorem

The govt has hiked the ad valorem duty on iron ore exports to 30 pc from 20 pc

The government has hiked the ad valorem duty on iron ore exports to 30 per cent from 20 per cent. The decision would enrich a cash-strapped government by around Rs 8,500-9,000 crore.

While the hike in export duty has understandably stunned the mining community,the move was in the offing for sometime now. Strong reservation by steel companies against unfettered iron ore exports found ready acceptance from former Steel Minister Virbhadra Singh,who wanted more restrictions on exports. Based on his ministrys inputs,Finance Minister Pranab Mukherjee had imposed a 20 per cent duty on exporting the domestically mined mineral.

When contacted,Singhs successor Beni Prasad Verma said,We should not fritter away our natural resources at the cost of domestic steel producers,who have invested crores of rupees in their plants. Where do we go when our own ore gets exhausted? So we had demanded the export duty, Verma told The Indian Express.

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The Federation of Indian Mineral Industries,the apex body of miners complained that Indian ore would no longer be competitive internationally.

As shipments from India dropped 28 per cent between April and November to 40 million tonnes,the countrys iron ore exports may end the year under 50 MT.

Mines minister Dinsha Patel could not be contacted but the move will certainly not go down well with his ministry,which had opposed any such move. It was of the view that a duty hike will not stop miners from exporting; it will only reduce their margins. We wanted wider consultation before a decision, said a senior mines ministry official.

In an earlier meeting of commerce and finance ministry officials,Department of Financial Services Secretary DK Mittal had made it clear that fiscal measures to curb exports of iron ore will be more remunerative than canalising them though MMTC for sale in the overseas nations as proposed by the commerce ministry.

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Verma had in August demanded that the duty on iron ore exports be enhanced to 30 per cent as valorem. Steel Secretary PK Misra shot off a letter to the Finance Ministry in September demanding that the steel industry was unwilling to compromise on raw material security. In November,Finance Secretary RS Gujral sought further justification for changing the duty.

Misra wrote back on November 17 saying unless domestic steel makers were assured raw material security,they would not feel emboldened to expand further. He cited that Indias likely steel production by 2020 would be 200 MT while its consumption has been growing at 9.2 per cent CAGR in the last five years. Even if steel production grew by 9 per cent,its likely production would be 152 MT by 2019-20 and 234 MT by 2024-25.