Miners warn government of revenue loss

Urge scrapping of duty on iron ore exports.

Mining companies are hopeful that the Centre will remove the duty (Rs 300 a tonne) on exports of iron ore as it is likely to incur a huge revenue loss to the government.

According to an estimation prepared by the Federation of Indian Mineral Industries (Fimi), the Centre is likely to incur a loss of Rs 3,279 crore in the current financial year on account of the export duty. "The loss of revenue will be due to reduced iron ore production, which will negatively impact the earnings of royalty, excise, sales tax and other linkages such as rail- and port-handling charges. The objective of the government to raise revenue will not be achieved. This financial year, the government may earn only around Rs 2,025 crore," the Fimi representatives pointed out.

On Monday, the Fimi representatives met the Group of Ministers, headed by Home Minister Shivraj Patil, and apprised him of the revenue loss projected. "We are hopeful that there will be no restriction on exports of iron ore. We are also hoping that the export duty will be removed to enable miners to take maximum advantage of the booming Chinese market for iron ore," Fimi Secretary General R K Sharma told 'Business Standard'.

The Centre reduced the duty on export of low iron ore fines (below 62 per cent grade) to Rs 50 a tonne following the pressure from various quarters. However, the Fimi contended that it would not boost exports as low grade iron ore fines accounted for a small share of the overseas sales.

Indian iron ore is exported to Japan, South Korea and China, which accounts for a bulk of the exports (83 per cent). India exported close to 90 million tonnes during 2006-07. China has already indicated that it would not prefer Indian iron ore if the export duty was not abolished. A majority of the Indian exporters have absorbed the duty without passing it on to the buyers.

"Chinese firms are not willing to accommodate the export duty since the price will be higher than the Brazilian iron ore. Indian iron ore industry is already in the doldrums. Consequently, Indian miners will be forced to reduce production, which will have a cascading effect on all other sectors," the Fimi representatives contended.

The Fimi expects the domestic iron ore exports to dip by 30 per cent this financial year on account of the duty, with exports already witnessing a downside. In March this year a few days after the duty was announced, the exports came down by 33 per cent compared with the corresponding period last year. As against 10.57 million tonnes exported in March 2006, 7.16 million tonnes were exported in March 2007.