Even though the government is yet to take a call on raising the export duty on iron ore, the steel ministry believes the move would be a long-term step in stabilising domestic steel prices due to cheaper input cost.
The ministry has written a letter to the finance ministry, requesting an imposition of 20 per cent duty on all grades of iron ore exports.
It believes the move would help in augmenting iron ore availability for domestic steel producers, planning large-scale expansion during this financial year.
“Export duty in a high price syndrome would result in windfall profits. Solution to controlling prices is by abundance and not by shortages. Abundant availability of iron ore in the domestic market either through domestic production or through imports would stabilise domestic prices. We don’t mind if windfall profits are made and something comes to the government by imposing export duty on iron ore. A decision to hike the duty would be taken by the Cabinet soon,” a senior steel ministry official told Business Standard.
The official said if iron ore exports were discouraged, domestic prices of iron ore might fall. “It will enhance the profitability of domestic steel companies, as they will get cheaper raw material.” Almost 60 per cent profit of steel companies comes from margin on raw materials and rest 40 per cent from steel making.
Besides iron ore, the government has plans to fix a threshold price for each of the non-renewable raw materials like bauxite, coal and hydrocarbon in terms of their export in limited quantities. “We should create a threshold. Thereby, when the prices cross the limit, we should start exporting and get high dividends. But, if prices dip below the threshold, we should start importing. This happens world over in many countries. The ministry is working on these deliberations,” the official said.
The government raised the export duty to 10 per cent on iron ore lumps and 5 per cent on iron ore fines in December last year. The steel ministry had expected that the decision to hike export duty on iron ore would be announced as part of the Budget for 2010-2011, but it did not happen.
Last week, steel producers Tata Steel, SAIL, Essar, JSW, Ispat Industries, Uttam Galva hiked prices by 1-4 per cent effective from April 1, on the back of surging input cost such as coking coal and iron ore.
