The government had earlier imposed 5 per cent duty on iron ore fines export and 10 per cent on iron ore lumps
In a move designed to curb iron ore exports, the Government is set to increase the tax on iron ore exports.
The tax is likely to be fixed at a uniform rate of 20 per cent across all iron ore products, said a Steel Ministry official.
This emerged after a meeting the Steel Secretary Atul Chaturvedi, had with steelmakers. “The tax structure on iron ore exports was discussed between different ministries today. We understand that the export tax on iron ore lumps may go up. A decision on increasing the tax is likely to come soon,” said Chaturvedi.
Officials from the Ministries of Finance, Mines and Commerce met on Thursday to discuss the issue of increasing export tax on iron ore.
Currently, the export tax structure is 5 per cent on iron ore fines and 10 per cent on high-grade iron ore lumps.
Uniform duty structure
The proposed levy of a uniform 20 per cent export tax comes after the Government in December imposed a 5 per cent duty on iron ore fines export and doubled the export tax on iron ore lumps to 10 per cent.
The Standing Committee on Coal and Steel has also urged the Ministry of Steel to take up with the Ministry of Finance the issue of curbing iron ore exports.
The committee expressed the concern that iron ore reserves may last only till 2021-22. “With a view to conserving iron ore for long-term use by the domestic steel industry and also to ensure its availability to them at an affordable/reasonable price, the Government must explore the possibility of restricting the export of iron ore,” said the report by the Standing Committee on Coal and Steel.
Relief for steelmakers
The move comes as a relief to the domestic steel industry which has been reeling under increasing prices of iron ore.
“This is a welcome move as more domestic iron ore will be available for us. But it is too early to comment on the impact of the move on prices,” said an official with a leading steelmaker. Steel prices had risen in April on account of the high costs of iron ore and coking coal.
The Steel Secretary also said that steel prices are likely to be stable for the next five-six months and that steel prices are not yet a concern.
Iron ore producers though were concerned about the proposed increase in export tax and said it would have a negative impact on exports. “Exports will be affected if duties are raised,” said RK Sharma, Secretary-General of the Federation of Indian Mineral Industries. However, this had been a long-standing demand of the domestic steel industry.
India’s iron ore exports for 2009-10 were expected to be marginally higher at around 106 million tonnes as against 105 million tonnes in the previous year.
According to data submitted by the Ministry to the Standing Committee on Coal and Steel, the production of iron ore in the country is almost double the domestic consumption of iron ore. However, consumption is set to increase with an expansion in steel production capacity by both public and private sector companies in the country.
Uneven impact on listed cos
The proposal to slap a uniform duty of 20 per cent on iron ore exports from India may have an uneven impact on the listed companies engaged in iron ore mining.
NMDC, for which exports accounted for just 15 per cent of sales last fiscal, may not suffer much from this impost, given that its revenues and margins largely rely on sales to domestic steel makers.
Even in its exported portion, NMDC supplies its high-grade ore mainly to clients in Japan and South Korea, which gives it considerable pricing power to pass on any impost; especially after mining giant Vale recently negotiated a 90 per cent increase in its contracted prices for iron ore supplies to Japanese steelmakers.
The export duty, however, will create yet another uncertainty for Sesa Goa which, as a miner of lower grade ore, relies mainly on Chinese ore buyers and that too in the spot market.
Not only do Chinese buyers exercise greater bargaining power with their suppliers, their purchases are also fraught with uncertainty. In recent weeks, there have already been questions raised about Chinese iron ore offtake, with the country trying to cool its economy and speculation about a possible ban on low-grade ore imports by China.
However, if it comes to a crunch, both NMDC and Sesa Goa enjoy operating profit margins (88 per cent and 52 per cent respectively last year) that are significant enough to allow at least partial absorption of any additional duty.
In a move designed to curb iron ore exports, the Government is set to increase the tax on iron ore exports.
The tax is likely to be fixed at a uniform rate of 20 per cent across all iron ore products, said a Steel Ministry official.
This emerged after a meeting the Steel Secretary Atul Chaturvedi, had with steelmakers. “The tax structure on iron ore exports was discussed between different ministries today. We understand that the export tax on iron ore lumps may go up. A decision on increasing the tax is likely to come soon,” said Chaturvedi.
Officials from the Ministries of Finance, Mines and Commerce met on Thursday to discuss the issue of increasing export tax on iron ore.
Currently, the export tax structure is 5 per cent on iron ore fines and 10 per cent on high-grade iron ore lumps.
Uniform duty structure
The proposed levy of a uniform 20 per cent export tax comes after the Government in December imposed a 5 per cent duty on iron ore fines export and doubled the export tax on iron ore lumps to 10 per cent.
The Standing Committee on Coal and Steel has also urged the Ministry of Steel to take up with the Ministry of Finance the issue of curbing iron ore exports.
The committee expressed the concern that iron ore reserves may last only till 2021-22. “With a view to conserving iron ore for long-term use by the domestic steel industry and also to ensure its availability to them at an affordable/reasonable price, the Government must explore the possibility of restricting the export of iron ore,” said the report by the Standing Committee on Coal and Steel.
Relief for steelmakers
The move comes as a relief to the domestic steel industry which has been reeling under increasing prices of iron ore.
“This is a welcome move as more domestic iron ore will be available for us. But it is too early to comment on the impact of the move on prices,” said an official with a leading steelmaker. Steel prices had risen in April on account of the high costs of iron ore and coking coal.
The Steel Secretary also said that steel prices are likely to be stable for the next five-six months and that steel prices are not yet a concern.
Iron ore producers though were concerned about the proposed increase in export tax and said it would have a negative impact on exports. “Exports will be affected if duties are raised,” said RK Sharma, Secretary-General of the Federation of Indian Mineral Industries. However, this had been a long-standing demand of the domestic steel industry.
India’s iron ore exports for 2009-10 were expected to be marginally higher at around 106 million tonnes as against 105 million tonnes in the previous year.
According to data submitted by the Ministry to the Standing Committee on Coal and Steel, the production of iron ore in the country is almost double the domestic consumption of iron ore. However, consumption is set to increase with an expansion in steel production capacity by both public and private sector companies in the country.
Uneven impact on listed cos
The proposal to slap a uniform duty of 20 per cent on iron ore exports from India may have an uneven impact on the listed companies engaged in iron ore mining.
NMDC, for which exports accounted for just 15 per cent of sales last fiscal, may not suffer much from this impost, given that its revenues and margins largely rely on sales to domestic steel makers.
Even in its exported portion, NMDC supplies its high-grade ore mainly to clients in Japan and South Korea, which gives it considerable pricing power to pass on any impost; especially after mining giant Vale recently negotiated a 90 per cent increase in its contracted prices for iron ore supplies to Japanese steelmakers.
The export duty, however, will create yet another uncertainty for Sesa Goa which, as a miner of lower grade ore, relies mainly on Chinese ore buyers and that too in the spot market.
Not only do Chinese buyers exercise greater bargaining power with their suppliers, their purchases are also fraught with uncertainty. In recent weeks, there have already been questions raised about Chinese iron ore offtake, with the country trying to cool its economy and speculation about a possible ban on low-grade ore imports by China.
However, if it comes to a crunch, both NMDC and Sesa Goa enjoy operating profit margins (88 per cent and 52 per cent respectively last year) that are significant enough to allow at least partial absorption of any additional duty.
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