Metals and mining giant Vedanta Resources has joined the growing list of companies to openly criticise the existing export duty of 30 per cent on iron ore exports from India. The high duty, particularly on lower-grade ores, which weren’t of any value to the domestic steel sector, was counterproductive, Vedanta Chief Executive Officer Tom Albanese told Business Standard.
“Once the mining bans are lifted, the heavy duty will restrict the amount of iron ore or the quality of iron ore that could be exported. So, the actual exports will be lower and the tax take will be even less,” Albanese said in an interview. He adding the high duty was part of what the sector, including Vedanta, had told the government were hurdles to the segment.
Until 2012, India levied five per cent duty on export of fines and 15 per cent on export of iron ore lumps. In December 2012, a flat 30 per cent export duty was imposed to conserve the key steelmaking raw material for the domestic sector. However, with global prices crashing and restrictions on mining imposed in several states, steel majors are opting for cheaper imports.
India’s iron ore exports have dropped from 117.3 million tonnes (mt) in 2009-10 to 12.2 mt in 2013-14.
During the same period, production fell from 218.6 mt to 145.4 mt, neutralising the benefits of lower exports for domestic steel producers. To offset the scarcity due to lower production, steel companies have resorted to imports, which rose to 1.87 mt in 2010-11, before falling to 0.37 mt in 2013-14.
The fall in ore output resulted from restrictions on mining imposed in Karnataka and Goa, along with output curbs by Odisha. India produced 200 mt of ore a year, exporting half that amount, before the Supreme Court imposed a ban on exploration in Karnataka in 2011, to curb illegal mining.
Albanese said India would find it difficult to claw back its lost share in the international ore export market as production picked up domestically with the current level of duty. Vedanta subsidiary Sesa Sterlite is among the firms severely impacted by the ban in Goa.