Iron ore production, exports set to drop to an all time low in FY14

Ban in Goa, delay in reopening of mines in K'taka and cap on output in Odisha to blame

India's iron ore production and exports in FY14 are set to hit an all time low in the last decade.

Production is set to drop at least 30% to slip below 100 million tonne from 135 mn tonne in FY13. Exports are likely to be in single digit to around 8-9 mn tonne.

This is mainly on account of ban in Goa, delay in reopening of mines in Karnataka and cap on output in Odisha among other factors.

In FY13, India exported 18 mn tonne valued at about $1.8 bn. The all-time high exports achieved by India was in 2009-10, when exports hit 117 mn tonne valued at about $10 bn.

A galaxy of miners, exporters gathered at Bangalore for the fourth international expo on mining have demanded the govt to reduce export duty on iron ore immediately to boost exports, which will in turn push up production and create employment. They also claim that it will help in containing the current account deficit by upto $10 bn in the next one year.

Currently, export duty on iron ore is 30% and the miners want it to be reduced to 10 %. But it is widely speculated that it could be reduced to 20%.

"The ministry of mines, commerce and finance are convinced about reducing iron ore export duty. The ministry of mines and commerce have prepared a draft on reducing duty and sent it to the Cabinet for approval", said H C Daga, President of Federation of Indian Mineral Industries (FIMI).

In Karnataka, 15 mines (12 in category A and 3 in category B) have resumed mining and can produce about 6 million tonne ore per annum. The Central Empoppwered Committee (CEC) has approved 57 mines. Out of 115 mines in category A and B, leases of 34 mines have expired and waiting for renewal.

Besides these 15 mines, state-owned NMDC is expected to produce about 7 million tonne. During the current fiscal, a maximum of 17 million tonne could be produced in Karnataka. Another 60-70 million tonne could come from Odisha, Chhattisgarh and Jharkhand this year. The government of Odisha has capped the output at about 57 million tonne per annum.

"Last year, we had about 10 million tonne of iron ore exported from Goa till September 2012. This year, no possibility of exports from Goa. That means we will be left with a maximum of 8 million tonne of exports mainly from the eastern sector," said Basant Poddar, senior vice president, FIMI said.

Reduction of duty is not sufficient unless the Railways remove differential freight tariff on iron ore meant for exports, he said.

Currently, Railways charges three times more tariff on ore when it is exported.