India's largest iron-ore miner NMDC today said the hike in export duty on the raw material to 20% will not hamper the profitability of the industry, including the Navratna firm, to a big extent.
"Basic purpose of the imposition of duty is to discourage iron ore exports. So certainly it will dip in the profits for the industry in general, but I believe that the margins will not be that bad for the industry," NMDC Chairman Rana Som told PTI.
Explaining that current market prices of the raw material are hovering between $160 and $180 per tonne, Som said that domestic producers will still be left with a margin of about $40-60 per tonne after paying all duties, royalty and freight charges.
"The move will definitely knock off the profits of the industry players, but not to a very big extent," he said.
Finance Minister Pranab Mukherjee, in the Budget for 2011-12, had fixed a uniform export duty of 20% on all types of iron ore, which is a vital steel-making raw material.
Before the Budget announcement, the export of iron ore lumps attracted a duty of 15%, while export duty on iron ore fines was 5%.
According to the Federation of Indian Mineral Industries (FIMI), iron ore exports will fall by 35% annually due to the increase in duty, thereby leading to lower domestic production and a rise in prices.
"Because of the hike in export duty, no fresh contracts are signed now, only earlier contracts are being honoured. This would lead to lower domestic production of the raw material, resulting in an increase in price," FIMI President Siddharth Rungta said.
Talking about the impact on NMDC, Som said, "We export only about 10% of our production and our main production is iron ore lumps, on which duty has been hiked by only about 5%. So the impact will be very marginal on us."
The Navratna firm, which accounts for 15% of the country's total iron ore production, has targeted a 25% increase in output to about 30 million tonne in the ongoing fiscal.
The company exports around 3,000,000 tonne to Japanese mills and 400,000 tonne to Korean steel maker Posco, while the remaining stock is sold in the domestic market.
