India unlikely to grant demand for lower iron-ore export tax

KOLKATA (miningweekly.com) - The Indian government is unlikely to slash the export tax on high-grade iron-ore although it might prune the rate for low-grade ore, even as miners step up accusations that the government is killing the mining industry.

The Steel and Mines Ministry was not keen to submit any proposal for a reduction of the export duty on high-grade ore to the Finance Ministry, which was currently putting the finishing touches to the Union Budget, which would be placed before the Indian Parliament later this month, a Ministry official said.

The Steel and Mines Ministry was sticking to its time-tested plea that a high rate of export tax was necessary to preserve the raw material for value addition by domestic steel mills, the official said.

It had been countering the miner’s demand for a lower rate on the grounds that it made little economic sense to ensure higher shipment of raw materials overseas only to be swamped with imports of finished steel, which the government had been claiming to be the biggest cause of financial distress among local steel producers, he added.

However, the government might not be averse to a reduction in the rate of export tax on low-grade iron-ore fines and lumps from 10% to 0%, as such low-grade raw material did not find use among local steel mills, he said.

In mid-2015, the government reduced the export tax on low-grade ore to 10% from 30% but kept the 30% tax on high-grade lumps and fines unchanged.

Government officials acknowledged their unwillingness to open up another front with the domestic steel industry by any further reduction of export tax.

The steel industry was battling a sharp rise in steel imports from China and South East Asian countries with the government moving fast to protect it by imposing safeguard duties and a minimum import price on inward steel shipments. At such a time, the government was unwilling to risk any fall in raw material supplies to local steel mills in case a lower export tax triggered an increase in overseas shipments of iron-ore, the official said.

However, such a stand had clearly not gone down well with miners.

“India is the only country in the world which has killed its flourishing iron-ore trade, depriving the country of foreign exchange on the plea that domestic industry is not hurt,” Federation of Indian Mineral Industries (FIMI) secretary general R K Sharma said.

In a communication to the government, FIMI had maintained that a reduction of the export duty on high-grade iron-ore would result in an incremental $750-million in foreign currency revenues for the government.

According to FIMI, Indian iron-ore exports in the current year would once again register a fall as indicated by the 12 major ports handling iron-ore, which handled 38% less iron-ore, at only eight-million tonnes, between April and December 2015, which included domestic and foreign cargoes.