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BW Businessworld

Govt May Lower Iron Ore Export Duty, Hike Import Duty On Steel

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The government is considering lowering export duty on iron ore from the present rate of 30 per cent if the prices of the key steel-making raw material remain subdued. "We have not given a thought on this but, if the current situation continues in the coming days, we will have to think on this," Steel and Mines Minister Narendra Singh Tomar told reporters.

At the same time, it is also considering raising import duties on steel after domestic steelmakers complained about surging shipments from China, and a decision may be taken in the next two to three days, the Steel and Mines Minister Narendra Singh Tomar said.

Steel imports from China, the world's biggest producer of the alloy, doubled in April-September from a year earlier, prompting JSW Steel Ltd and other Indian steelmakers to ask for higher import tariffs.

"We have received several letters from Indian steel companies seeking help to compete with imports from China," Tomar said on Wednesday. He did not say by how much the duties will be raised. Currently the duties are in the range of 5 percent to 7.5 percent.

Struggling with overcapacity at home, China has boosted exports of steel qualifying for a generous tax exemption to countries like India and Japan, triggering accusations that mills there are taking advantage of the rebate to sell surplus steel cheaply.

Meanwhile, the international price of iron ore, which is now ruling at its five-year low at $75 per tonne, has led iron ore exports unviable for the domestic producers.

In a research note, released today, Citi has predicted an average price of $74 a tonne for iron ore in the first quarter of the next year,  $60 by September 2015 and further down to $50 per tonne.

Some miners in low-grade iron ore producing state of Goa are not very enthusiastic about resuming their recently renewed mines saying with each tonne of production, they may have to end up shelling out $1 from their own pockets.

Low-grade iron ore prices are trading at $50-55 a tonne now. India, once world's third largest exporter of iron ore, is believed to become a net importer in current fiscal. Export of the raw material has come down drastically to 14.42 million tonnes in 2013-14 as compared to 117.37 million tonnes in FY10. Miners often blame the inflated export duty for the dip in shipments.

During the April-June quarter of the current fiscal, India exported 2.25 million tonnes of iron ore compared with 3.01 million tonnes in the same quarter last year.

Miners' body FIMI said the situation can be improved drastically provided the government ensures speedy clearances and fiscal policies are reversed to pre-2010 level.

Private sector miner Sesa Sterlite recently pitched for scrapping export duty on iron ore in the face of sliding prices globally, especially on low grade that is exported from Goa to make mining a profitable proposition.