NEW DELHI: THE steel ministry has proposed an across the board increase in export duty on iron ore to discourage export and lower the import duty zero to ensure that there is adequate raw material available for the domestic industry.
The proposal, if implemented, could affect the prospects of the domestic iron ore exporters such as Sesa Goa, MSPL, Rungta Mines, Essel Mining etc. It will also impact operations of state-owned NMDC that is one of the biggest exporter of high grade iron ore lumps to steel mills in Korea and Japan. The proposal, however , will benefit domestic steel manufacturers as it will increase the availability of cheaper ore for value addition within the country, helping them to boost their bottomlines.
In its pre-budget memorandum to the finance ministry, the steel ministry has suggested that the export duty be hiked to 20% on all grades of iron ore from the current levels of 10% on iron ore lumps and pellets and 5% on iron fines.
“This is a good suggestion made by the steel ministry as higher duty will help in preserving ore for value addition within the country and increase its availability at cheaper prices for steel makers. At a time when steel capacity in the country is proposed to be increased manifolds, large scale exports of the raw material is not justified,” said director finance of Ispat Industries Anil Surekha. The duty on pellets, lumps and fines was raised only recently December 2009 following consistent rise in ore exports. Prior to December, the duty on iron ore fine was nil and on pellets and lumps was 5%.
Iron ore imports, on the other hand, attracts a duty of 2%. The steel , ministry has recommended that this should be brought to zero to facilitate coastal steel plants who use high grade iron ore for blending.
“Iron ore exports have been increasing on account of current global demand, particularly from China. During April-October , 2009, the exports of iron ore is higher by 20.8% in comparison to last year. Indications are that this may further increase,” the steel ministry has said, justifying the increase in export duty.
The ministry had at times even argued for a ban on iron ore exports to conserve raw material for the industry, a demand that has found favour with the big steel players. The steel ministry also wants the customs duty on stainless steel and alloy steel melting scrap to be brought down from 5% to zero, to further boost the availability of raw material for the industry.
It is, however, keen to insulate the domestic industry from imports and suggested that the 5% import duty on flat and long steel products and sponge iron, pig iron, could be retained at the current levels.