India May Impose 20 Percent Tax on Its Iron Ore Exports.

The Press Trust of India reported on January 17 that the Indian government is planning to impose 20 percent export tax on iron ore, effective from April 1 for the fiscal year 2011-2012. According to the report, India's finance minister Pranab Mukherjee may announce the decision at end of this week.

The imposition of such a tax by India on its iron ore exports may push international iron ore prices upward and will influence its iron ore exports to China. India is the major iron ore supplier for China. During the past five years, Indian iron ore has occupied around 20 percent of the Chinese iron ore market.

Increased cost would be passed on to Chinese buyers

According to the report, the Indian government decision to impose the tax on iron ore exports would be aimed at stabilizing domestic iron ore prices and increasing government revenues. Some analysts have commented that iron ore exporters from India would be expected to pass on the increased cost to Chinese buyers.

At present, the Indian government imposes a 5-15 percent export tax on the different grades of iron ore. After the adjustment, a 20 percent export tax would be effective for all iron ore grades.

Source : steelorbis.com