Will the Budget waive export duty on iron ore and impose duty on steel imports?

Both the iron ore mining and steel industries are at cross roads. It is hoped that the Union Budget will provide the much needed relief to both industries

 

For months now, the iron ore exporters have been seeking help from the Indian government to assist them in reviving mining industry. It may be remembered that, due to the Supreme Court ruling and subsequent relaxation, there has been some activity in this industry, though, press reports show that, as much as 12 million tonnes of iron ore, are lying in both Odisha and Goa ports for shipment.  In the meantime, the international price has taken a beating and, coupled with the economic slowdown and reduced off take by China, the iron ore prices have come down to about $61 a tonne.
 
The Federation of Indian Mineral Industries (FIMI) has presented a memorandum, as reported in the press, that the government ought to waive the export duty on iron ore and actually impose duty on import of steel and pellets to 30%.  Both these moves will bring respite to the industry which has been suffering for long, for a variety of reasons.
It may be noted that there was export duty on iron ore in 2008-09.  This was incrementally increased from 5% in 2009-10 to reach 30% by December 2011. This increase has made exports unviable, and the Chinese imports have practically stopped. Iron ore exports, which saw a high of 117.37 million tonnes in 2009-10 has gone down to touch 14.42 million tonnes by 2013-14.
 
Due to fall in the international market price level, the state-owned NMDC (National Minerals Development Corporation) has also been constantly reviewing its prices, and recently brought down the price of lumps to Rs4,200 and Rs3,060 for fines per tonne. As mentioned above, the international price touched a low of $61, the lowest level in the last five years! 
 
The domestic steel makers have taken advantage of this fall to import their needs and this has reached 6.51 million tonnes in the last nine months. The depreciated value of the Russian rouble against the US dollar has also made it cheaper to import steel from Russia!
 
Because of the free trade agreement with Japan and South Korea, steel imports from these two countries have also increased, and the domestic industry has been demanding that the Government ought to impose an increased duty structure, for certain types of steel products, from the current 7.5% to 10% at least!  
 
There are also allegations that poor quality steel is being imported into the country and this needs to be stopped by strict quality control measures.
 
Domestic steel makers continue to prefer the use of lumps, as these have greater iron content and have not, so far, obtained the technology to use low grade fines with high grade lumps, imported or indigenous, to make steel. China with its state of art technology has literally mastered steel manufacturing from low grade fines with high grade lumps!  It may be remembered that China has been the biggest importer of Goa fine ore and mixed them with high grade ores from both Australia and Brazil to make the steel.
 
The Iron Ore Exporters' Association, in the meantime, has pleaded with the government to waive the export duty on iron ore, 8 million tonnes of which are lying in Goa and 4 million tonnes in Odisha ports, so that they can monetise the ore and recover their cost and meet their obligations to their bankers.  
 
Both the iron ore mining and steel industries are at cross roads. It is hoped that the Budget will provide the much needed relief to both. It is surprising that leading exporters of Goa fine ores have not given adequate thought to the realistic and practical idea of collaborating with the Chinese to put up a joint venture in Goa to use the ore from the state and high grade ores from indigenous or imported sources. They could have killed two birds in one stone!
 
There is ample scope and time for ‘Make in India’ to happen, right here, in this industry! 
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
 
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