Government cuts export duty on iron ore

Government cuts export duty on iron ore

New Delhi: As part of its economic stimulus package, the government has cut export duty on iron ore to 0% on fines and 5% on lumps — a move expected to give the much-needed boost to the industry reeling under the pressure of low demand and fall in prices.

“Export duty on iron ore fines will be eliminated and on iron ore lumps will be reduced to 5%," the government said in the economic stimulus package.

At present, 8% ad-valorem export duty exists on iron ore fines, while that on lumps stands at 15%.

The move is expected to benefit iron ore companies, including Vedanta group firm Sesa Goa, MSPL, among other leading firms, which witnessed a fall in prices of their produce by up to 60% to $50 a tonne at present.

“We are happy that the government has listened to the federation. This move is going to help the industry. However, we will be happier if the duty on lumps is also removed," Federation of Indian Minerals Industries Rahul Baldota said.

Domestic steel manufacturer Ispat Industries welcomed the move saying that the move will let Indian iron ore companies export more of their produce amid waning demand, while JSW steel saw the step against the interest of the industry.

“It is a welcome move. Iron ore demand is shrinking in the domestic market. The industry would now be able to export more of their output. In the long run, if the move hits our interest, we will approach the government," Ispat Industries Vice-Chairman and MD Vinod Mittal said.

However, JSW Group CFO Seshagiri Rao said: “I think the move will hurt the steel industry as iron ore prices will increase with the changes in the duty structure. It will be interesting to see by what percentage iron ore exports increases with the step amid the waning demand in the global market."

The government has altered the duty structure on the vital raw material for the domestic steel industry twice in as many months.

It had imposed a 15% ad-valorem export duty on the two iron ore categories earlier this year to increase their availability in the domestic market, when there was a surge in its demand in the international market.

Off late, under the clutches of the global economic downturn, the industry witnessed wanning demand and prices declined up to 60%. Iron ore fines had touched the peak of $143 a tonne in June this year and is now hovering around $50 per tonne.

Domestic mining companies export about 84% of the iron ore fines saying that the segment is not heavily consumed in the country.