Orissa iron ore exporters want relief from new export levy

Exporters argue that the transportation cost accounts for more than 60 per cent of the total value of iron ore exports.

Earlier, a specific duty of Rs 300 per tonne was imposed on export of iron ore lumps and fines with over 62 per cent iron content, and Rs 50 per tonne on lower grade ore. Under the new policy, exporters are required to pay 15 per cent on the total value of the ore being shipped out.

Rajesh Kumar Das Pattanaik, managing director, P K Ores, said, "Imposing a 15 per cent ad valorem duty on the material (iron ore) is fine, but it is not fair to add the transport cost to it when we are already paying a 12.5 per cent service tax."

The exporters say that the duty will badly hit the domestic steel industry. They say shipments will be confined to already committed orders with no fresh offtake.

Exporters apprehend that Chinese imports may decline as the banks there are still maintaining the shipment limit of $30 million. They are, reportedly, not raising the limit in view of the slowdown in the US economy.

Besides, the per tonne freight on board price, which was about $80 last year, has already increased to $120.

Ore exporters in the state also fear that if fines and concentrates are not exported, it may create an environmental problem as well as need additional storage space.

Miners will be forced to curtail production creating a demand-supply mismatch.

The measure is likely to hit new steel companies, particularly smaller units, attaining financial closure but with no assured iron ore linkage. They would have to pay more for sourcing it from open market.

Pattanaik said, "Of the 49 companies which have signed memoranda of understanding (MoUs) with the Orissa government, 22 have already attained financial closure. Most of them are still without iron ore linkages and are dependent on open sources."

Prabodh Mohanty, managing director, Surrendra Minings, pointed out if the 15 per cent ad valorem duty continues, an exporter will have to pay about Rs 600 per tonne, nearly doubling the duty burden from Rs 300 earlier.