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Iron Ore Exporters hold shipments expecting rollback in export duty

AIT News Network

CHENNAI. As a knee jerk reaction to imposition of Export duty in the Finance Bill 2007 many exporters of iron ore fines have put on hold the proposed shipments. Media reports indicate as many as Five shipments meant for China stand cancelled. It is also reported that a move is afoot to get the export duty rolled back by citing various reasons, some of them are not logical at all. Of course every one has the right to react to the Budget proposal(export duty).

Congratulations to Finance Minister. The mindless export of Iron Ore Fines of all kinds has been put on check. The nail is put by way of imposition of Export duty of Rs. 300/ pmt on Iron ore fines of all sorts of purity vide Clause 105 (ii) of the Finance Bill 2007 which has come into effect from MARCH 1^ST 2007.

While many Steel majors have welcomed the imposition of export duty it is worth examining why such move of the FM has been resented by export lobby. India is third largest country on the mineral deposit of iron ores after BRAZIL and AUSTRALIA. In the current fiscal, out of total production of 160 million tonne export is expected to touch 95 million tonne of iron ore. Our reserve has been put at 25,249 million tonne that will last for 100 years. Our country out of this rich natural wealth of iron ore can manufacture 110 million steel every year. On the other hand there is an argument by iron ore exporters that 84% of iron ore exported are fines and have no market in India. Railways earnings on account of iron ore exports is also put at over Rs.3000 Cr.

But the scenario obtaining in CHINA is altogether different. According one published analytical report Indian Steel Industry’s major concern is the possibility of large arrivals of Chinese steel. This will again push steel industry into major crisis of supply management and price fluctuations. Further some EU members are also considering anti dumping move against China. Even US Steel makers are upset over China’s mind boggling export of steel. It is also widely reported that China indulges in unfair trade practices and there are larger number of illegal steel manufacturers in China. Further it is an undisputed fact that some major steel companies of India are completely dependent on procuring iron ore from domestic mines only. Currently the ex-mine price of iron ore is Rs.2000/pmt. The present imposition of export duty will increase the ex-mine price only by 9.5 to 10% and this can be very well absorbed in their profit. On the other hand revenue yield will be around Rs.2000 Cr. which can be used judiciously for welfare measures. Considering all the pros and cons the FM is right in imposing export duty on iron ore which is long over due. Please do not withdraw this on any account. It can even be more worth if all the private iron ore mines are nationalised and the export channelised.