Inventory of iron ore is growing at mine heads as lower domestic offtake against expanding production and the existing steep export duty of 30 per cent has deterred movement of the ore outside the country.
Data by the Indian Bureau of Mines (IBM) shows the total stock of iron ore (as on July 31, 2016) has climbed to 144.52 million tonne (mt). Of this stock, around 85 per cent has built up in Odisha, the largest producer and Jharkhand, another key producing state. Around 70 per cent of the stockpile comprises iron ore grade with iron ore content below 62 per cent, this includes both lumps and fines. An overwhelming 93 per cent of this quantity is fines.
“Iron ore production in the country is expanding but domestic demand is not enough to absorb it. The only outlet for this piled up ore is exports. However, the high export duty of 30 per cent on higher grade ore has hampered exports. We have been appealing to the Union government to lift this export duty as has been done for lower grade ore”, said R K Sharma, secretary general, Federation of Indian Mineral Industries (FIMI).
The Government of India in the Budget for FY17 removed the export duty of 30 per cent on lower grade iron ore fines and lumps (with iron content less than 58 per cent). The step has boosted exports of lower grade iron ore from Goa where is hardly any value addition. But, states like Odisha and Jharkhand, with comparatively richer ore continue to suffer. Almost all the iron ore mines in the two states are concentrated in the hinterland, away from the ports. Non-lifting of ore has resulted in piling up of 83.98 mt of iron ore at mine heads in Odisha and 38.85 mt in Jharkhand by the end of July 2016.
Even, escalating prices of iron ore in international markets powered mainly by China’s stimulus has not cheered the exporters.
“With bouncing back of prices, we have been able to recover a little more than the cost of production. But, the effect is nullified by the existing 30 per cent export duty. If there is no duty, the miners can fetch better returns from exports and stay competitive in global trade where volatility and price swings rule”, said an official with a standalone mining company.
In 2015-16, the country churned out 156 mt of iron ore. Against this output, the net domestic demand was 112.41 mt. Exports were lacklustre at 6.04 mt whilst leading steel companies, mainly JSW Steel, imported 5.62 mt iron ore in last fiscal.
Odisha’s chief secretary has already written to the Union Mines Ministry, pleading for lifting the 30 per cent export duty, concerned on growing stockpile of iron ore.
FIMI has also been lobbying with the ministry to exempt iron ore with iron content of up to 62 per cent from the export duty on ore exported from the ports of Paradip, Dhamra, Haldia and Visakhapatnam.
Leave a Reply