The Federation of Indian Mineral Industries (FIMI) has asked the Indian government to roll back the increased export duty on iron ore to the pre-budget 2011-2012 level, the Press Trust of India has reported citing the letter of FIMI secretary general R K Sharma wrote to India's Finance Ministry.
Accordingly, the hike in India's export duties on iron ore fines and lumps to 20 percent, up from five percent and 15 percent respectively in its 2011-12 budget, would allow illegal miners to reap benefits, Sharma said.
"Such increases in export duty under pressure from the steel body and the Ministry of Steel keep the iron ore industry on tenterhooks and do not allow the generation of a surplus to invest in exploration," he added.
India had shipped over 100 million mt of iron ore in 2009-2010, of which 70-80 percent were fines. Indian steel producers mostly use lumps and the requirement of fines do not exceed 30 million mt a year as two major steelmakers, SAIL and Tata Steel, use fines produced from captive mines. The plants which do not have own mines procure fines from non-captive stand-alone mines, including NMDC.
"To supply lumps to the domestic industry, fines have to be evacuated from mines. Since domestic demand is inadequate, the only outlet is export. In the absence of an attractive export market, a large portion of iron ore produced will be wasted," Sharma said, adding that the total demand for iron ore from the Indian steel industry is about 102 million mt against the domestic iron ore production of 299 million mt.
In addition, as of March 1, Indian Railways has also raised freight on iron ore meant for exports by INR 100/mt to INR 1,600/mt (about $35.5/mt). "The increase in export duty and railway freight has affected the iron ore industry very adversely," Sharma said.