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Ore miners say duty will lead to 70% drop in exports

Ore miners say duty will lead to 70% drop in exports
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First Published: Sat, Mar 03 2007. 04 07 AM IST
Updated: Sat, Mar 03 2007. 04 07 AM IST
Bangalore:  Miners in Bellary, who account for a quarter of India’s iron ore production, say the export duty of Rs300 a tonne on export of the commodity that was proposed in the Budget could shrink their business by half and hurt employment in the backward district. 
Several companies such as Sesa Goa, India’s largest private-run exporter of iron ore, mine 40 million tonnes of ore in the 64 mining leases covering 49,000 hectares in the district. The industry estimates that around two lakh people are employed in the region. However, it could not put a number to the job losses that would likely stem from imposition of the levy.
“It is a step that will definitely kill the industry,” said Hothur Mohammad Iqbal, president of the Bellary Hospet Miners Association, which has a membership of over 100 miners in the border district of Karnataka.
India exports close to 90 million tonnes—most of it to China—of the 155 million tonnes of iron ore it produces.
Iron ore imports by China, the biggest consumer of steel in the world, has more than tripled prices to $58 (Rs2,552) a tonne today from around $17 (Rs748) a tonne in 2000. Such buoyant prices have given a boost to the industry and turned Bellary’s miners into billionaires who have at their disposal eight aircraft, including three helicopters. The district also has a high concentration of high-end sports utility vehicles like Mitsubishi Pajero, besides luxury cars like Mercedes Benz.
Their ostentatious lifestyle contrasts with the rest of Bellary, which ranks among the lowest in human development index in Karnataka. Most mine owners remain inaccessible and have a private security ring around them when they travel in the region. Five legislators in the state assembly from Bellary are mine owners.
The miners argue that the Budget proposal is not well thought out because the ore they mine is not used by local steel makers. They say the domestic industry uses lump iron ore to produce steel, whereas they mostly export fine iron ore. “We produce more iron ore than the domestic industry can use, so why should we curtail exports?” Iqbal, who owns a mine in Bellary, asked.
The Rs300 levy per tonne of ore exported, finance minister P. Chidambaram argued, was necessary to mop up revenues and conserve mineral wealth as suggested by a committee on mining reforms headed by former civil servantAnwarul Hoda.
The duty, a mining company executive said, would make Indian iron ore exports more expensive in the world market coming on top of a 10% increase in the commodity’s prices from April.
“Exports will be hit badly, by 60-70%,” said Rahul Kumar Baldota, vice-president of the Federation of Indian Mineral Industries.
Baldota, director of MSPL Mines in Hospet, which exports close to two million tonnes of ore, said the country would lose out to Australia and Brazil, the top two iron ore exporters in the world, as exports from India would turn uncompetitive.
Karnataka earns Rs80 crore royalty from iron ore licences in Bellary. State industries secretary Mahendra Jain expressed hope that a portion of the money collected from the new levy would be used in the region for the development of mining infrastructure.
Janardhana Reddy, a legislator and a mine owner who plans to double production in his mines to five million tonnes in the year ending March 2008, said the levy would bring down steel prices in the country. “Profits will reduce for miners. But there will be enough ore for steel plants in India that will also bring down steel prices for consumers,” he said.
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First Published: Sat, Mar 03 2007. 04 07 AM IST
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