New Delhi, Sept. 11: A lobbying war has erupted over a move to open up iron ore exports and slash the duty on ore exports. While the commerce and finance ministries are in favour of the move, the steel ministry is not pleased.
Finance minister P. Chidambaram has made it clear that he is in favour of increasing the export of iron ore, which brought in around $4.7 billion in 2011-12. Moves are also afoot to cut the export duty on the ore to 20 per cent from 30 per cent.
Draft cabinet notes on the issue have been circulated and have garnered support from the mines ministry and the Prime Minister’s Office but have faced strong opposition from the steel ministry.
While the government may have to approach the Supreme Court to resolve the impasse on the mining ban to revive exports, the duty cut is expected to give a fillip to the small stream of legal shipments.
With the rupee in a bad shape, the consenting ministries feel encouraging exports through duty cuts can result in up to $7 billion in earnings.
The steel ministry, however, contend that instead of low-value ore, the government should encourage the export of value-added manufacturing items made from high-quality ore.
Steel ministry officials further said raids at ports found out that instead of fines, much of what was being exported was high-grade ore having iron content of more than 60 per cent.
Officials, however, agreed that even the high-grade ore lying idle in ports should be auctioned to either domestic steel plants or to exporters.
Domestic steel firms exported 4.04 million tonnes (mt) in 2011-12 and 5.25mt in 2012-13, which fetched $4 billion and $5 billion, respectively.
The steel industry, which accounts for 2 per cent of GDP (gross domestic product), had nearly 20 per cent idle capacity because of slack domestic demand.
The steel ministry says this builds a case for encouraging higher domestic steel production, based on cheap raw materials, which can be exported.
In a letter to commerce minister Anand Sharma, steel minister Beni Prasad Verma argued that it “makes more sense to push exports of steel valued at $800-1,000 per tonne rather than raw materials valued at $100-120 per tonne”.
Top steel makers have thrown their weight behind their ministry’s contention and have been lobbying for support against relaxing iron ore exports.
Cheap exports of high-grade ore to China and Japan have been a sore point with steel makers in India. They argue that the domestic steel industry is expanding and will need the scarce ore.
Good quality iron ore and coal are the two most sought-after resources in the global commodities market.
India and Brazil are the only nations with such high-quality ore. There have been proposals earlier that India should barter high-grade ore for high-grade coal from China, which it needs to blend with local low-grade coal, though nothing has emerged out of this proposal yet.
However, the Federation of Indian Mineral Industries, which represents iron ore miners, has long been making a case that India has sufficient reserves for local steel producers and for exports.