Indian mines ministry look for tax reduction on exports of low grade iron ore

Indian mines ministry is seeking a lower export tax for iron ore, helping Sesa Goa Ltd, NMDC Ltd. and rival producers of the raw material clear stockpiles.

The ministry will recommend lowering the 30 percent tax on low-grade iron ore fines to the finance ministry, Mines Secretary Vishwapati Trivedi said in an interview, without elaborating. Rising freight costs and a drop in prices have inflated stockpiles, increasing pollution, he said.

“Iron ore fines are rarely used by the local steel industry and stocks are piling up at various mines,” Trivedi said. “It’s damaging to the environment. A lower tax on exports could help companies ship these stocks out.”

Indian iron ore companies have been weighed down by government moves to restrict output in two of the nation’s biggest ore producing states to check illegal mining and environmental breaches. A 30 percent export tax and weakening sales to China are expected to reduce exports to the lowest in 12 years in the year ending March 31, the Federation of Indian Mineral Industries said.

Low-grade Indian fines are used mostly by steelmakers in China that have the facility to use them in their furnaces. Indian mills typically use high-grade lumps.

“A cut in export taxes alone won’t boost shipments,” said R.K. Sharma, secretary general at theFederation of Indian Mineral Industries. “Higher export taxes and lower prices have made Indian shipments unviable, leading to a cut in output and layoffs at mines.”

India’s ore exports may drop 33 percent to 40 million tons in the year to March 31, Sharma said on July 3. The association has also sought a cut in export taxes from the finance ministry, he said today.

Source: Bloomberg