Even as the Finance Ministry is working on a proposal to reduce the export duty on iron ore from the current 30 per cent, differences have emerged within the Government on this issue.
While the Mines Ministry wants export curbs eased in order to give relief to the mining sector, the Steel Ministry and Heavy Industries Ministry have opposed the move.
In a letter to the Prime Minister, a copy of which has also been marked to the Commerce and Industry Ministers, Praful Patel, Heavy Industries Minister, said: “I am concerned that starving the domestic steel industry of its critical raw material, and allowing its export, may result in lower production and availability of steel to the domestic manufacturing industry, especially the auto industry, which is undergoing a severe recessionary phase, and which can ill-afford any supply shocks.”
Earlier, Steel Minister Beni Prasad Verma had opposed the move. The Mines Ministry is hoping that opening up export markets would give some relief to the iron ore mining sector, which has been hit by a court-ordered closure of many mines for violation of law.
Iron ore production fell sharply to 140 million tonnes in 2012-13, from 219 million tonnes in 2009-10. This was mainly due to closure of a large number of mines in Karnataka following the Supreme Court orders, and the ban on mining in Goa.
The enforcement of a strict regulatory regime in Odisha, post the Shah Commission report, has substantially brought down iron ore production in the largest iron ore producing State.
The issue of exporting iron ore started when the Prime Minister, while addressing the annual meeting of Assocham on July 19, pitched for removing the constraints in the export of iron and other ores. Finance Minister P. Chidambaram had on Thursday said that the matter was being examined by the Central Board of Excise and Customs.
Pressure on prices
Praful Patel argued that encouraging exports would only exacerbate the limited availability of iron ore, and put pressure on prices.
The net foreign exchange earnings through export of iron ore would at best be $100 a tonne, while the cost of importing steel would be $600 a tonne. The economics, therefore, from a current account deficit point of view, did not seem to justify encouraging exports of iron ore, he explained.
“With the drastic curtailment in the domestic availability of iron ore, the country’s import of finished steel increased to 7.87 million tonnes in 2012-13. Simultaneously, for the first time, the country actually imported almost 4 million tonnes of iron ore in 2012-13, against exports of over 100 million tonnes in 2009-10. The steel industry also imported 8 million tonnes of scrap and 8 million tonnes of direct reduced iron last year due to shortage of iron ore,” Patel added.