Duty hike need not mean lower prices: NMDC

NMDC chairman and managing director Rana Som today said the 20 percent export duty on iron ore proposed in the Union Budget would not impact the profit margins of the mining industry but it was not necessary that the domestic prices should come down.

In the Budget 2011-12, the rate of export duty for lump and fine iron ore has been enhanced and unified at 20 per cent ad valorem, while iron ore pellets have been fully exempted from the duty.

Speaking to the media on the sidelines of a conference here on Thursday, Som said, "The normal trend in economics is that whenever there is export duty, the domestic price goes down. But iron ore is not a regular commodity. Good quality iron ore is scarce in the country, so the price of good quality ore may go up also. Let's see what happens."

The public sector miner reported a net profit of Rs 4,400 crore for the April-December period of this fiscal, on a net sales income of Rs 7,599 crore. Som said NMDC's exports were just 10 percent of its total production and so the duty would not impact its revenue much. For the iron ore export industry too, the impact would not be much given the comfortable margins at present and those margins would remain, he said.

To a question on its possible impact on future price agreements with its customers, he said, "We have no idea right now. We are watching the situation." He explained that the export duty usually has a dual impact: first, on the net realisation from export; and second, its impact on the domestic price situation. "We have to take into account both these aspects," he said.