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Increase duty on iron ore exports to 20%: ASSOCHAM
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SME Times News Bureau | 18 May, 2010
The Associated Chambers of Commerce and Industry (ASSOCHAM) on Monday urged the government to increase export duty on iron ore fines to 20 percent from present 5 percent to curb exports of the raw material and discourage "unprecedented" increase in illegal mining.
In a letter to the Commerce, Steel and Finance Ministers, ASSOCHAM President Swati Piramal strongly suggested canalization of High Grade Iron Ore (Fe>60%) through the MMTC and imposition of 20 percent export duty on iron ore fines as against current rate of 5 percent.
"This will generate additional revenue of Rs. 15,000 crore to exchequer," it added.
The industry body, expressing serious concern over increasing illegal mining in the country, said, "Following the mining boom and ban imposed by the Chinese government on the imports of low grade iron ore having Fe less than 60 percent, iron ore miners have suddenly increased manifold their operations."
The government had recently raised the export duty on iron ore lumps to 15 percent from 10 percent previously. Earlier, in December, 2009 export duty on iron ore lumps was increased from 5 percent to 10 percent and on fines from Nil to 5 percent.
According to ASSOCHAM, the private iron ore miners, who are making a windfall profit through exports have created a myth that Iron Ore fines are lying in excess in the country and claim Indian steel industry is not equipped to use the same.
"This is a total distortion of facts as most of the integrated steel plants using sinter and pallets where iron ore fines are extensively used. In fact higher usage of pallets and sinter go on to increase the efficiency of the iron making process," said Piramal.
ASSOCHAM also added that another myth created by Iron Ore miners is that by increasing the export duty, Iron Ore exports will come down drastically and affect the economy adversely.
"This argument is not tenable since we have seen during the economic downturn when the Iron Ore prices had crashed down to around $60, Iron Ore exports were not impacted at all and India still exported around a 100 million tonnes," it said.
The ASSOCHAM chief stated that that Indian steel producers source from domestic miners with pricing parity equated to the spot export FOB-prices. "In view of the high Chinese demand for Indian iron ore, aggravated by the oligopoly of the global mining majors, exports of Iron Ore from India have continued to remain in excess of 100 million tones," it added.
Citing Australia's example, which has recently planned to levy a 40 percent Resource Rent Tax (super profit tax) uniformly across the mining sector, Piramal said that this is an extension of the taxation practices already being exercised by few countries such as Norway, Tajikistan, Latvia, Belarus and New Zealand.
ASSOCHAM pointed out that iron ore and cooking coal are the two primary input raw materials for manufacturing steel and integrated steel producers are compelled to import most of their requirements due to lack of availability of the raw materials in the domestic market. "Unfortunately, major global miners hold a strong oligopoly for Coking Coal and have been steering the market to their whims and fancies," ASSOCHAM said.
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