Local value addition for steel products better deal than exports

As the Ministry of Mines pitches for removal of export duty on high grade iron ore to salvage surplus stock piles in the states of Odisha and Jharkhand, local value addition of the raw material is a better way to deal with excess inventory, experts said.

Odisha had last month approached Mines Ministry for abolition of 30 per cent export duty on high grade iron ore, enabling the state to sell surplus in the international market.

"Mines Ministry in turn has sought Steel Ministry's opinion on the subject. We are awaiting response from them (Ministry of Steel)," an official said.

India expects sizeable investment in infrastructure, and conserving resources for local use help keep costs for infrastructure projects in control.

"This is an old debate between two sectors of the economy. The strategy adopted by countries, especially those that have a significant market for end-use products, is to focus on local value addition rather than raw material exports. For countries like us, raw material security is a key consideration," Kameswara Rao, Leader, Power and Mining, PwC India said.

During 2015-16 iron ore production in the country was to the tune of about 140 million tonnes as against domestic demand of around 106 million tonnes. Some states even tried auctioning surplus iron ore but the effort received lack lustre response from the consumption side.

As on March 31, 2016, surplus iron ore stocks at mine-heads was 162 million tonnes as compared with 128 million tonnes on March 31, 2015.

High grade iron ore, with more than 58 per cent iron content, is an important raw material for the steel industry.

Excess iron ore may have an impact on both the environment and agriculture as during rainy season surplus raw material may spill over to rivers or may spread over agriculture fields due to strong winds, an expert said.

At present, the freight rate for iron ore is 14 per cent more than for coal and manganese.

Railway freight on iron ore should also be brought at par with coal and manganese ore and export duty on all grades of iron ore should be abolished to make exports viable, the expert added.