Ahead of the Budget for FY21, merchant miners have called for waiver of 30 per cent export duty on iron ore with Fe grade between 58 to 62 per cent.
Miners through Federation of Indian Mineral Industries (Fimi), have stressed on exemption of the steep export tax since there were hardly any takers for baser grade ore within the country. Steel manufacturers opted for richer grade ore to keep in check the costs of steel making.
Amid such lukewarm demand for lower grade ore in the domestic market, exports seemed to be the only viable outlet.
In its pre-Budget memorandum submitted to the Union Finance ministry, Fimi held that the inventory of iron ore at mines heads had climbed to 162.85 million tonnes (as on March 31, 2019). A preponderance of this accumulated ore is in Odisha and Jharkhand.
Most of the iron ore comprises Fe grade between 58 and 62 per cent, the exports of which still attract 30 per cent duty while duty has been exempted for iron ore up to 58 per cent Fe grade.
As per Fimi's assertions, demand for lower grade ore with Fe content up to 58 per cent is losing traction in the international market. Besides, the mines in Goa that have been largely exporting this grade of iron ore have been shut since March 2018.
“Abolition of export duty up to 62 per cent Fe will help in liquidating to a large extent the huge stockpile of iron ore at mine-heads which will result in enhanced foreign exchange earnings besides more production of iron ore in the country.
The Federation therefore requests for complete withdrawal of export duty on exports of iron ore up to 62 per cent Fe content as against 58 per cent Fe”, Fimi said in the pre-Budget note.
The immense stockpile of iron ore at mines heads need to be cleared since merchant mines have their lease validity ceasing by March 31, 2020. The merchant leaseholders need to liquidate the stock within six months of end of the lease tenures.
Fimi opined that the high incidence of export duty has been to the detriment of iron ore exports. From the peak level of 117.37 million tonnes (mt) in 2009-10, iron ore exports drastically tanked to 4.5 mt in 2015-16. Since then, iron ore exports had a roller coaster.
They rose to 30-48 mt in 2016-17 after the Government of India abolished 30 per cent duty on ore containing Fe up to 58 per cent. The duty waiver gave a boost to low grade ore exports from Goa and helped NMDC Ltd to ship its material at a concessional duty of 10 per cent but it tumbled again in 2018-19 to 16.19 mt.