Ministries differ over iron ore export duty .

New Delhi, April 27 The Commerce and Steel Ministries do not seem to be seeing eye-to-eye on the issue of iron ore export duty.

The Steel Ministry had recently proposed a uniform 20 per cent export duty on iron ore.

At a press conference on Tuesday, the Commerce and Industry Minister, Mr Anand Sharma, said, "There will be no increase in the export duty on fines. There will be a marginal increase on lumps which we are in agreement with (other ministries)."

"The mining activity is done in poor, backward and tribal regions. Mining is a labour intensive industry. To take a wholesome, fair and balanced view, we had an Empowered Group of Ministers meeting chaired by the Finance Minister," he said.

This suggests the Government is rethinking imposing a uniform 20 per cent export duty on iron ore. There is currently a 10 per cent export duty on lumps and 5 per cent on fines.

India exports iron ore in lumps and fines. But it consumes only lumps as primary steel producers do not have the technology to use fines.

Mr Sharma said India produces about 225 million tonnes of iron ore annually, but the optimum level of domestic consumption was only 87 million tonnes. Therefore, there was a huge surplus of mined iron ore, both lumps and fines, but mainly fines, close to 140 million tonnes.

However, with both public and private sector companies expanding production capacity, domestic consumption of iron ore lumps would jump in the next two years.

The Steel Ministry has set a target of 124 mtpa production capacity by 2012-13, more than double the current production capacity of around 54 mtpa. Iron ore exports for 2008-09 was 106 million tonnes, of which about 85 per cent were fines.

Steel Ministry sources said there was lobbying against the proposal to levy a uniform 20 per cent export duty on iron ore.

Recently, domestic steel prices increased due to iron ore prices nearly doubling to $120-160 per tonne. This resulted in an increase in input costs for many industries. The hike in export duty of iron ore was seen as a move to increase domestic availability of the mineral, which would in turn help in controlling steel prices.

To discourage iron ore exports, the Steel Ministry had last month written to the Finance Minister, Mr Pranab Mukherjee, and the Prime Minister, Dr Manmohan Singh, seeking to double the export duty on iron ore.

However, Mr Sharma said, "I hope our industry will develop so that there is a value addition. But as of now, it is the iron ore lumps which are consumed by the primary steel manufacturers. The secondary steel manufacturers do not consume even lumps."

Source : Business Line