Monday, February 28, 2011

India hikes iron ore export tariffs to 20%, pellets exempt

The Indian government has lifted the export duty for iron ore fines and lumps to 20% ad valorem, while granting full exemption from export tariffs for iron ore pellets, Steel Business Briefing learns from the finance ministry’s announcement of the union budget for the April 2011-March 2012 fiscal year.

The increased tariffs come into effect from 1 March. Until now, India had levied export tariffs of 15% on lumps and pellets and 5% on fines.

Finance minister Pranab Mukherjee said that iron ore “is a natural resource which needs to be conserved.” The steel industry had lobbied hard for export restrictions. Full exemption from export duty is being provided to iron ore pellets to encourage the value-addition process for fines, Mukherjee added.

The Federation of Indian Mineral Industries (FIMI) believes that this increase in tariffs will hit not only exports but also affect domestic ore production. “Indian miners will now limit production of fines, which will also affect output of ore lumps,” FIMI secretary general R.K. Sharma tells SBB. “This will drive up the prices of lumps and so steel prices will escalate. This renders the whole process counterproductive,” he reasons.

Market sources also note that state-owned miner KIOCL Ltd (formerly Kudremukh Iron Ore Company Ltd) is presently the only Indian firm permitted to export iron ore pellets.

India is the world’s third largest iron ore exporter, shipping 115m tonnes in 2009 mostly to China.

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