Commerce ministry seeks iron ore export easing

Move aimed at increasing forex earnings

The commerce and industry ministry will soon move the Cabinet Committee on Economic Affairs (CCEA) over resumption of iron ore exports. The move, prompted by the unprecedented depreciation of the rupee, is aimed at augmenting the foreign exchange reserves.

The draft Cabinet note, floated by the commerce department under the commerce and industry ministry last month, did not receive a positive response from the steel ministry, which is of the view that any step towards resumption of iron ore exports would adversely impact the domestic steel industry. However, the commerce department is confident that with a “considerable support" both from the Prime Minister’s Office (PMO) and the finance ministry, the proposal will be taken up by this month and will also pass through, officials told Business Standard.

Iron ore exports took a major hit after the Supreme Court imposed a ban on mining last year following widespread scandals in Karnataka and Goa. India’s biggest destination for iron ore exports is China.

India, which has been the third largest iron ore exporter in the world, is expected to become a net importer of iron ore this financial year (FY14). In FY13, India had exported 15.85 million tonnes (mt) of iron ore, compared with 89.73 mt in FY11. For Japan, iron ore exports have fallen to 2.16 mt in FY13 from 5.45 mt in FY11. Similarly, for South Korea, iron ore exports were a mere 0.14 mt last year, down from 1.46 mt in FY11, according to commerce department data.

Total iron ore exports have come down by a drastic 18.37 mt in 2012-2013 against 67.74 mt in 2011-2012 and 97.66 mt in 2010-2011.

Last month, Commerce and Industry Minister Anand Sharma had said he was going to meet Finance Minister P Chidambaram over the issue soon and take up the proposal as the mining industry employs a large number of people.

“The availability of ore to domestic industry is ensured through high export duty of 30 per cent and higher railway freight on cargo. A large part of the iron ore mined is in the form of fines. Surplus fines, which are not agglomerated by the domestic industry for its use, are exported,” said Minister of State for Commerce and Industry D Purandeswari.

However, the steel industry is up in arms over the proposal. In a letter to Prime Minister Manmohan Singh, Sajjan Jindal of JSW Steel has said that the industry is facing severe shortage of iron ore in Karnataka due to a delay in restarting mines. “At this juncture, relaxing the export restrictions on iron ore would not be a step in the right direction.”

The mining industry is pushing for a reduction in the export duty on iron ore, while the steel ministry favours status quo on 30 per cent export duty on the same.

The export duty on iron ore was raised to 30 per cent in December 2011. Earlier, the government had raised the duty from 5 per cent on fines and 15 per cent on lumps in December 2009 to a uniform 20 per cent in March 2011.

R K Sharma, secretary-general of Federation of Indian Mineral Industries, said: “We have been asking the government to reduce the duty on export of iron ore. We have written to finance ministry as well. The mining ban and high export duty is detrimental to the growth of our industry, which is a huge employment generator as well.”

In an earlier letter to finance ministry, Sharma had said the exit of the world’s third largest iron ore exporter (India) has been perfectly timed for miners in other countries seeking alternatives for their growing supplies as appetite from top buyer China slows.

The production of iron ore has come down from 218 mt in 2008-09 to 140 mt in 2012-13 due to the enforcement of strict environmental and other regulatory measures. The steel industry says it is forced to import iron ore because of the drop in production levels.