Iron ore levy cut unlikely to boost exports

The reduction of export tax on low grade iron ore fines (below 62 per cent grade) from Rs 300 per tonne to Rs 50 per tonne is unlikely to boost exports since this grade accounts for only 25 per cent of the overseas sales. On Thursday, the Centre announced the reduction in export tax following protests from mining and trading firms.

"We had predicted a 30 per cent fall in exports of iron ore in 2007-08 on account of the tax. Last fiscal, India exported in excess of 90 million tonnes (of which 74 per cent was all categories of fines). We can never match that figure this year even with the reduction in export tax on low grade fines. The low grade fines account for only 25 per cent of the overall exports," S B Chauhan, advisor, Federation of Indian Mineral Industries (FIMI), told Business Standard.

He pointed out that the tax reduction will provide "marginal relief" to miners and exporters in Goa, which accounts for 30 per cent of the iron ore exports. "There is no logic behind granting relief only to low grade iron ore fines. What about low grade iron ore lumps? The relief should have been uniform. The government should have reduced tax on both low grade iron ore fines and lumps," he noted.

The exports of iron ore fell by 33 per cent in March following the introduction of the tax. FIMI is of the opinion that the fluctuation in exports of iron ore will depend on Chinese steel mills. "We will wait for another three months for the Chinese steel mills to assess this reduction of export tax on low grade fines," Chauhan said.

Meanwhile, FIMI is writing to the Centre seeking withdrawal of export tax on all categories of iron ore. "This is not the method to address the issue. We are firm on fighting for withdrawal of export tax on both iron ore fines and lumps," FIMI senior vice-president Rahul Kumar Baldota stated.

Sources in the mining industry contended that the export tax on low grade iron ore fines was reduced in view of the elections to the state assembly in Goa (in June this year). "It is very clear that the tax reduction will benefit only Goan mine owners. The tax reduction will definitely have political implications in Goa," sources noted adding that several Goan politicians, cutting across party lines, were either into mining or trading of iron ore.