Tariff on iron ore to yield Govt a bonus

With global iron prices ruling at an all-time high, the government's decision last week to levy a 15 per cent ad valorem duty on export of iron ore could fetch about Rs 5,800 crore in additional revenue this fiscal year, officials said on Monday.

Until now there was a specific duty of Rs 300 per tonne on ore exports of over 62 per cent iron content and Rs 50 per tonne on ore with less than 62 per cent iron content. These fetched Rs 1,750 crore through 2007-08 and the projection for this fiscal was Rs 2065 crore.

The new ad valorem duty, which replaces earlier duties, is estimated to bring at least Rs 7,900 crore through 2008-09, if the country exports as much as it did last year, a steel ministry official said on condition of anonymity.

Last year, India exported 105 million tonnes of iron ore, mostly to China and Japan.

Miners say that the duty makes Indian iron ore uncompetitive and China would no longer find it lucrative to import ore from here. India exported 105 million tonnes of the 180 million tonnes of iron ore produced in the country in 2007-08, mostly to China and Japan.

"This is a big blow for us. The government should first ensure 100 per cent utilisation of ore within the country before taking such steps. China will now stop importing ore from us and we will have to drastically cut down our production," said R K Sharma, secretary general of Federation of Indian Mineral Industries. "Unlike steel where there was a lack of supply there has been no shortage of ore in the country and hence this duty does not make sense."