Mine Game

New Delhi, May 20: The government may revive a proposal to hike the export tax on iron ore as the price of the mineral is rising.

It could happen soon after the Karnataka elections are over. Top officials said that a fresh proposal to replace a fixed nominal cess on ore export with a tax of 6-8 per cent of the value of export (ad valorem tax) might be on the government’s agenda.

An earlier proposal to slap a 15 per cent tax on the value of export had been rejected after several rounds of meetings of a group of ministers, following objections by the commerce ministry.

The commerce ministry was opposed to an increase in the tax because it would kill exports with ore firms making long-term commitments to buyers from abroad.

Officials say they expect the commerce ministry to continue objecting to any increase in the export tax as it wants to push up export realisations.

At present, the fixed duty on ore export stands at a low of Rs 50 a tonne in the case of low-grade iron ore and Rs 300 for a tonne of high grade ore. Steel makers who have been consistently lobbying in favour of raising the tax say that with ore prices rising, a tax will help keep some ore back.

However, iron ore miners, who are mainly in Karnataka, Jharkhand and Orissa, contend that a higher tax will not help in checking prices as they export mostly fines, which are not used by leading steel mills.

India produces 155 million tonnes (mt) of iron ore annually, of which 89 mt are exported, including about 75 mt to China. But steel makers, unhappy with the government for forcing them to cut prices, say both fines and lumps are exported and they could use fines for making pig iron, if it is available at reasonable rates.

Iron ore spot prices have gone up to $200 a tonne from $140 a tonne in January.

One view in the finance ministry is that exporters enjoy higher realisations without any significant cost increases, which should make them willing to share more revenue with the government.

The Congress-led government has already slapped a 15 per cent export tax on steel, cut import taxes on mild and semi-finished steel to zero and removed a 14 per cent countervailing duty on construction steel.

However, no specific steps have been taken to rein in rising iron ore prices.