New tax dents iron ore exports target

Iron ore exports from India in 2006-07 fell short of the figures projected by the Union government on account of the new tax (Rs 300 per tonne) on the overseas sales of the ore. The industry feels that there would be substantial fall in the exports in the current financial year too.

In 2006-07, the country's iron ore exports stood at 92 million tonne as against 100 million tonne projected by the government. In 2005-06, the figure stood at 91.5 million tonne. The government had scaled up the projection figures in the last fiscal foreseeing higher Chinese demand.

Chinese steel mills consumed about 84 per cent of Indian iron ore exports, followed by Japan and South Korea. Though the Chinese firms have long-term contracts with various domestic mining companies, spot trading accounts for bulk of the exports. Top 10 steel mills in China suspended spot trading with domestic companies following the imposition of the new tax.

"The fall in exports can be easily attributed to the tax. Had the tax not been imposed the exports would have crossed 95 million tonne," Federation of Indian Mineral Industries (Fimi) senior vice-president Rahul Kumar Baldota told Business Standard.

According to him, March is the busiest month for iron ore exports. However, the month saw a steep 33 per cent decline in ore exports last financial year. Approximately, 7.16 million tonne was exported in March 2007 as against 10.57 million tonne in March 2006.

Fimi anticipates 50 per cent decline in iron ore exports this financial year. "The Chinese steel mills have made it clear that they will increase imports from Australia and Brazil. This will impact Indian exports badly," Baldota pointed out.

Though Fimi is keen on identifying new markets, it is unlikely to maintain the same level of exports. "China is driving the steel market in the world. It is our principal market," he noted. Indian iron ore accounted for 23 per cent of Chinese imports (third largest after Australia and Brazil).

Iron ore exports from India have been growing significantly since 2000. The country exported 41.64 million tonne in 2001-02, 48.02 million tonne in 2002-03, 62.57 million tonne in 2003-04, 62.57 million tonne in 2003-04, 78.14 million tonne in 2004-05 and 91.5 million tonne in 2005-06.

Iron ore production too fell short of government projection during 2006-07. The country produced 160 million tonne of ore in the last financial year as against a targeted 170 million tonne. The country produced 155 million tonne of iron ore in 2005-06.