Iron ore output, exports could hit all-time low

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

India’s iron ore production and exports are set to hit a decade’s low in the current financial year. Production could drop 30 per cent to less than 100 million tonnes (mt) from 135 mt in FY13. Exports are likely to be at eight-nine mt. This is mainly on account of a ban in Goa, delay in reopening of mines in Karnataka and a cap on output in Odisha, among other factors.

The differential freight tariff charged by Indian Railway on iron ore meant for exports, which is over three times more than that of domestic tariff, has prevented miners from exporting ore in the eastern sector. The export duty on iron ore is 30 per cent.

In FY13, India exported 18 mt valued at about $1.8 billion. The country’s all-time high exports were in 2009-10, at 117 mt valued at about $10 billion.

A galaxy of miners and exporters gathered at Bangalore for the fourth international expo on mining has urged the government to reduce export duty on iron ore immediately to boost exports, which will in turn push up production and create employment.

“The reduction duty will help the mining sector earn foreign exchange to the extent of $10 billion over a period of one year, so that we can contribute towards bringing down the current account deficit up to $10 billion in one year,” said H C Daga, president, Federation of Indian Mineral Industries.

Currently, export duty on iron ore is 30 per cent and the miners are asking for reducing it to 10 per cent. But it is widely speculated that it could be reduced to 20 per cent.

“The ministries of mines, commerce and finance are convinced about reducing iron ore export duty. The ministries of mines and commerce have prepared a draft on reducing duty and sent it to the Cabinet for approval,” Daga said.

In Karnataka, 15 mines (12 in category A and three in category B) have resumed mining and can produce about 6 mt ore per annum. The Central Empowered Committee 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 mt this year. During the current financial year, a maximum of 17 mt could be produced in Karnataka. Another 60-70 mt could come from Odisha, Chhattisgarh and Jharkhand together. The government of Odisha has capped the output at about 57 mt per annum.

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

Reduction of duty is not sufficient unless the railways remove differential freight tariff on iron ore meant for exports, he said. Currently, the railways charge three times more tariff on ore when it is exported.