Negotiation on LTA soon

Agreement on iron ore export to be extended

The commerce and industry ministry will soon initiate discussions with Korea, Japan and China to extend the long-term agreement (LTA) for export of iron ore. The present five-year agreement is expiring in March 2006.

"We will begin the exercise soon. With the increase in international prices of iron ore, prices under the LTA have appreciated by more than 71 per cent in 2005-06 over the previous fiscal," a commerce department official told Business Standard.

To promote export of iron ore, it had been decided that the state-owned agency, MMTC Ltd, would procure iron ore from the producers at market-related prices without the intervention of the state government, an official said.

It has also been decided that the practice of revalidating the unutilised portion of the previous years licence will be discontinued. The unutilised portions will now be allowed to lapse. "The practice of revalidation is being discontinued, since it is difficult to reconcile the figures," an official said.

Though the ministry has begun a review of the iron ore policy, it has decided to continue with the present policy during the current fiscal.

The review had been initiated following reports of some parties circumventing the policy provisions by declaring iron ore as below 64 per cent Fe (iron) content so as to export under the open general licence (OGL).

At present, iron ore with less than 64 per cent Fe content is allowed to be freely exported under the OGL, while iron ore with 64 per cent FE content and above is exported under licence or through the MMTC.

The Directorate General of Foreign Trade is expected to notify the policy soon retrospectively from April 1 and issue licences to 14 parties for exporting 6.1 million tonnes of iron ore in 2005-06.

The government had last year issued licences for export of 7.2 million tonnes. Officials said licences could still be issued for another one million tonnes of iron ore exports.