The cut in export duty for low grade iron ore to 10 per cent is expected to provide a slight relief to Goa-based miners, but experts say it is too little too late to revive exports from India.
Finance Minister Arun Jaitley has lowered the export duty on iron ore with 58 per cent iron content, while maintaining the duty at 30 per cent for higher grade ore. Typically, this kind of iron ore is found in Goa, which till 2009-10 was the largest exporter of the mineral from India.
International prices
Industry observers said the international prices of iron ore are so low that there might not be a market for Goa’s low grade iron ore.
“Today, due to overcapacity, mining giants like Vale, Rio Tinto and others are selling high grade ore (62 per cent iron content and higher) at $55-56 a tonne. The market for low-grade iron ore is diminishing internationally as the Chinese steel mills have reconfigured to use higher grade ore. Low grade iron ore is trading at less than $50 a tonne, which leaves little room to have good margins,” said a mining industry official.
Goa’s lower grade iron ore was primarily sold to Chinese mills at a time when 62 per cent iron ore was selling internationally at $177 a tonne, around four years ago. However, after India imposed an export duty of 30 per cent it lost out on market share to other countries.
RK Sharma, Secretary General of Federation of Indian Mineral Industries (FIMI) said that the increase in royalty last year, the contribution of Goa miners to the district mineral fund (10 per cent), and other regulatory costs leave little room for profitability.
Royalty
Last year, the royalty miners of iron ore was increased to 15 per cent of the sales value from 10 per cent.
“With about 52 per cent going in duties and taxes, Goan miners are left with 48 per cent out of which transportation costs need to be paid. I doubt there will be any substantial export even after the duty cut,” said Sharma.
However, Goa-based companies like Vedanta Ltd welcomed the move for an export duty cut and saw it as a relief.
The company’s Chief Executive Officer of the Iron Ore Business, Kishor Kumar, said that the decision is a shot in the arm for the Goan iron ore industry.
Source: Hindu Bisiness Line
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