New Delhi: Concerned over reports of the Steel Ministry favouring a 10-15% ad valorem duty on the export of iron ore, miners have sought Prime Minister Manmohan Singh’s intervention in withdrawing the duty.
India’s share in China’s total import of iron ore is just around 20% now and the bulk of the supplies, which sets the market trend, are from Australia and Brazil. Fresh ad valorem of existing duty would be detrimental to the health of iron ore industry, the Federation of Indian Mineral Industries (FIMI) said in a letter to the Prime Minister.
It pointed out that since February 2007, when the duty was imposed on iron ore, there has been an increase in costs which had a bearing on ore exports.
While the rise in export prices has compensated increased costs to some extent, the industry is apprehensive about its sustainability as current high export prices may be a short-term phenomenon. Further, India’s share in spot sales may go down as Rio Tinto now proposes to sell 20-25 million tonnes on spot basis, it said.
“There is a concerted misinformation campaign about soaring export prices by domestic steel lobby, who desire iron ore cheap. A closer examination will reveal that high ocean freights from Brazil and congestion in Australian ports are driving up the iron ore spot prices. However, despite this, the exports to China are coming down due to the rise in mining and logistics costs in India,” it said.
FIMI said since the imposition of export duty, the rupee has risen more than 12.3% against the dollar.
While Rupee realisation has gone down, the cost of extracting iron ore has appreciated due to input costs. “The net result is that the margin available with the mine owners is squeezing day by day,” it said.