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Budget might slash ore export duty to 10 per cent

FINANCIAL CHRONICLE
Published Feb 18, 2016, 10:24 am IST
Updated Feb 18, 2016, 10:24 am IST
Changes are expected to help the mining industry find new export markets
Slash in ore export duty could be big relief to the mining industry.
 Slash in ore export duty could be big relief to the mining industry.

The government may bring down export duty on high grade iron ore from the present 30 per cent to 10 per cent while completely withdrawing this levy on Goa ore having less than 58 per cent iron content, which could be big relief to the mining industry.

The changes, which may be part of budget 2016-17 proposals, are expected to help the mining industry find new export markets at a time when ore prices have hit a decade-low of $29 per tonnes and demand has plummeted.

 

“We expect budget to come in support of the mining industry where both production and exports have fallen sharply on account of global slowdown and resultant fall in prices,” mines secretary Balvinder Kumar told FC, adding: “We have asked the finance ministry to withdraw 10 per cent export duty on Goa ore with less than 58 per cent iron content while bringing down the duty on other grades of ore to 10 per cent from present 30 per cent.”

Iron ore exports attract a 30 per cent duty. The duty is levied across-the-board, without any distinction on the basis of quality. Late last year, the government had come to Goa mining industry’s aid by reducing export duty on low-grade iron ore fines with iron content of less than 58 per cent to 10 per cent. It also exempted pellets from exports duty to promote value addition in the country.

 

“This (export duty cut) would give a positive signal that the government is taking note of severity of problems being faced by the mining industry. But mere export duty cut would not help the sector and the Centre should also look at reducing railway freight on ore meant for exports and bring them at par with domestic frei­ght,” federation of Indian mineral industries secretary general R K Sharma said.

Market conditio­ns and wrong set of policies, he said have caused over one milli­on job losses, both direct and indirect, in the sector and the problem could only aggravate if affirmative action is not taken by the Centre.Low demand and high taxes have shrunk iron ore exports from a high of 127 million tonnes (mt) in 2011-12 to less than 5 mt in 2015 (January-December).

 

The current level of exports is also mainly due to shipments by state-owned miner NMDC to honour long-term supply contracts with mills in Korea and China.

Moreover, iron ore production during 2011-12 to 2015 has also declined from 227 mt to 129 mt, while FoB price of ore had plummeted to $29 a tonne from over $165 a tonne in 2012-13.In this scenario, a 30 per cent duty has further outpriced Indian ore in the global market.

Court orders to stop mining in several states due to the absence of environment and forest clearan­ces have also hit the industry. This has caused dislocation to the extent that the country last year became a net importer of the mineral.

 

The mines ministry has made a case for further reduction in exports duty on low-grade Goa ore fines as its local consumption is negligible and almost entire production is exported to countries like China and Japan.

Peak exports from Goa stood at 54 mt in 2010-11. But this plummeted over the next two years after court imposed mining ban in the state over complains of illegal mining.“Globally, better grade of ore is available at competitive prices. So, why will anyone buy it from here (Goa)? We need to make the industry competitive or else, I fear, the exports will not happen,” said Ambar Timblo, MD of Fomento Resources.

 

Apart from iron ore, the mines ministry has also requested the finance ministry to consider raising the import duty on aluminium products by 2.5 per cent to 7.5 per cent and not raise the same on aluminium scrap.

The aluminum association of India has urged safeguard duty on aluminium and the mines ministry has asked the finance ministry to expedite the case.

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