The government today proposed to remove the export duty on low grade iron ore fines and lumps in a bid to make the domestic mining sector, particularly in Goa, competitive amid a fall in prices globally.
"Export duty on iron ore fines with Fe content below 58 per cent has been proposed to be reduced from 10 per cent to nil while export duty on iron ore lumps with Fe content below 58 per cent will be brought down to nil from 30 per cent," Finance Minister Arun Jaitley said while unveiling the Budget 2016-17 in the Lok Sabha today.
The government has been considering reducing export duty on iron ore as it wants to help revive the mining industry, which is facing tough times due to softening of global commodity market. Prices of the ore globally have plummeted to a decade low and there are few takers for the Indian iron ore.
The intention is to help the industry stay competitive as globally prices of iron ore have on an average declined 40 per cent and in the case of lower grades (below 58 per cent) have plummeted to a decade low, they added.
There is a 30 per cent export duty on iron ore fines with Fe content of 58 per cent and above and 10 per cent for below this content. For iron ore lumps, the duty is a flat 30 per cent.
Current price for iron ore is around USD 39-40 a tonne, excluding royalty, cesses and transport costs. By reducing the export duty to 10 per cent, there is a good chance to find some takers for the ore.
This will also help in liquidating stocks ahead of the increase in production in coming months.
A senior government official said: "Last month, the government reduced export duty on iron ore pellets to zero from 5 per cent to make the commodity more competitive amid subdued demand and weakening prices."
Similarly, for iron ore lumps and fines, the cut in export duty will help producers cut their losses. Also, the export duty on iron ore shipped by state-run NMDC has been slashed to make it more competitive and a similar step can be taken for other exporters, he added.
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"The Budget proposal to remove export duty on lumps and fines with iron content of less than 58 per cent has come as a big relief for the Goa iron ore mining industry," Kishor Kumar Chief Executive Officer Sesa Iron Ore, an arm of Vedanta group told
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Vedanta Group CEO Tom Albanese said the scrapping of export duty on low grade iron ore is a step in the right direction as this would enable the producers to achieve right value of the mineral to some extent in the present scenario of commodity downturn.
"The import duty hike to 7.5 per cent will help the bleeding aluminium industry in capturing only some of the lost domestic market. We expect more support from the government in the coming days to control dumping of aluminium into India from countries like China," he said.
Albanese said that the government should revisit doubling the cess on coal and lignite production.
"Such an increase will add to the woes of buyers and increase the input costs. In the present times of global commodity downturn, industries like aluminium will not be able to bear the burden," he said.
Albanese appreciated government's intent on incentivising natural gas production from deep seas as well as providing calibrated marketing freedom to new oil and gas discoveries.
"With the announcement of several other structural reforms, including the proposed new policy on disinvestment of public sector firms and simplification of policies, we compliment Finance Minister for a growth oriented Budget," Albanese said.
