Miners urge Indian govt to scrap iron-ore export tax

11th February 2015 By: Ajoy K Das
KOLKATA (miningweekly.com) – The scrapping of the export duty on iron-ore, rather than a reduction in the levy or a dual rate, was the only option if reviving India’s share in the global iron-ore export market is to be achieved, local miners have said.

In a communication to the government just ahead of India’s federal budget later this month, the miners noted that only by scrapping the 30% export tax on iron-ore would India be able to improve its market share in global trade, which slumped to 2% in 2013 compared to 20% in 2008.

The Federation of Indian Mineral Industries (FIMI) said that the export tax has skewed the demand-supply dynamics of iron-ore production in the country.

The body, representing leading miners in the country, said that the tax had wiped India from the global iron-ore trade and severely restricted the production of iron-ore fines. On the other hand, the local steel industries were faced with raw material shortage as domestic steelmakers did not have the technology to use fines in their blast furnaces.

FIMI claimed that secondary steel producers, which accounted for around 60% of domestic steel production, were cutting down on plant utilisation capacities in the face of a shortage of iron-ore lumps.

Leading miners said that the government’s proposal for a dual rate of export duty would also be discriminatory and unworkable.

In response to persistent demand from miners, the Mines Ministry has forwarded a proposal to the Finance Ministry, to put in play a dual rate of export duty - a lower rate for iron-ore fines with an iron content below 58% and a higher rate for high grade fines with an iron content 63.5% and above.

A miner, with operations in Odisha along the eastern coast of India, flayed the dual rate proposal on the grounds that it would benefit only miners in Goa on the western coast where production was primarily that of low-grade ores.

He said that for mines in eastern and central India with reserves of higher grade ore, production was of mixed grades and a dual rate would open up a Pandora’s Box of illegalities such as mis-declaration of grades of ore shipments to get the benefit of better rates on a lower grade.

This would be another setback for the mining industry, which was just getting its feet back after reeling from the impact of illegal mining across the country and the forcible closure of mining operations under court orders.

Drawing up the direct correlations between imposition of the export tax and India falling off the global trade in iron-ore, FIMI said that exports had declined from 117.37-million tonnes in 2009/10 to just 14.42-million tonnes in 2013/14. The Indian government during the period had periodically hiked the tax from nil rate in 2008/09 to 5% in 2009/10, 20% in 2011/12 and thereafter to 30% in the following year.

Edited by: Esmarie Swanepoel