Sajjan Jindal seeks status quo on iron ore export duty

Jindal writes to PM, FM and plan panel asking them to ensure availability of iron ore for steel industry

JSW Steel has raised grave concerns about the removal of export duty on iron ore exports, stating it would be detrimental to the domestic steel industry, which is facing acute shortage of iron ore.

In a letter to Prime Minister Manmohan Singh, Finance Minister P Chidambaram and Deputy Chairman of the Planning Commission Montek Singh Ahluwalia (a copy of the letter is with Business Standard), Sajjan Jindal, chairman and managing director of JSW Steel, has said the steel 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.

Prime Minister Singh, while addressing a public meeting of an industry chamber last month, had said the government was considering easing the export duty on ore to encourage exports, as a measure of bringing down the current account deficit (CAD).

“Due to severe shortage of iron ore in Karnataka, our steel plant at Vijayanagar is operating at 75-80 per cent capacity utilisation only. It is very unfortunate, that while Indian steel plants are running at lower capacity utilisation, the country is importing steel to fulfil its demand,” he said. India's steel imports registered a rise of 15 per cent in 2012-13, a cause for further widening the CAD. “It would be pertinent to note that India imported steel worth $6 billion in 2012-13, even after being the best place to manufacture steel,” Jindal said.

He said the production of iron ore has come down from 218 million tonnes (mt) in 2008-09 to 140 mt in 2012-13 due to the enforcement of strict environmental and other regulatory measures. It is also evident that there used to be a surplus of almost 100-110 mt in 2008-09 and 2009-10. However, this has come down to a meagre 17 mt in the year 2012-13. The production of iron ore is expected to remain at 140 mt due to the cap in production in Karnataka, ban in Goa and strict enforcement of environmental regulations in Odisha.

However, domestic steel industry requirement is 145 mt in the current financial year. The industry is forced to import iron ore, which is not economically viable, he said.

As a result of the shortage of ore, JSW Steel is able to procure only 42,000 tonnes of it per day against the requirement of 55,000 tonnes and is operating its plant at 75 per cent capacity, he said. Jindal said the government had taken a decision in the Budget of 2007-08 that   ore exports would be discouraged through various fiscal measures, at a time when more than 100 mt surplus iron ore was available.

“If the exports restricts are relaxed in the present scenario, iron ore exports will not take place due to non-availability of iron ore, and restriction by the Supreme Court in Karnataka and Goa. However, iron ore prices will increase in the domestic market, which will force the steel industry to cut production due to poor economic viability and impact the production of steel in the country. In such a scenario, the country will have to increase its steel imports, which will further worsen the current account deficit,” Jindal added.

He further said: “If (the) government ensures the availability of iron ore for domestic steel production, which is running at all time low utilisation level in the country, the imports of steel will go down and also the CAD.”