News and Events

Bid to tax ore export profit

The government is considering a windfall tax of 20-25 per cent on iron ore exports to cash in on the rising price of the mineral. The price of iron ore has doubled in a year in the global markets.

Officials said India was looking to take a leaf out of Australia that had proposed a similar windfall tax on ore exports, though at a much higher rate of 40 per cent.

Countries such as Norway, Tajikistan, Latvia, Belarus and New Zealand already impose such levies on mineral exports.

"Whether we impose higher taxes on or not, global prices are going up, partly because of demand-supply mismatch and partly because of the Australian proposal. So we see no reason why India should not try to take part of the huge profits that iron ore miners are reaping," said finance ministry officials.

Analysts estimate that profit from iron ore mining increased to over Rs 5,500 a tonne in 2010 from around Rs 60 a tonne in 2000.

However, the tax on iron ore fines, the ones commonly exported, has been kept at a modest 5 per cent. Two months back, the government had increased the tax on the export of iron ore lumps to 15 per cent from 10 per cent. The move was meant to discourage the export of the high-grade mineral, but the measure did not have much impact, say analysts.

Government statistics show that about 50 per cent of the iron ore mined in the country are exported. Exports have nearly trebled over the last decade, from 37.49 million tonnes in 2000-01 to 105.86 million tonnes in 2008-09.

From April 2009 to January 2010, exports surged 10.5 per cent to 89.20 million tonnes. Though ore fines with 50 per cent or less iron content are mostly exported, analysts say in many cases high-grade lumps with more than 60 per cent iron content are mixed with the fine shipments.

Illegal mining in Jharkhand, Orissa and Karnataka are believed to be rampant with miners often paying protection money to Maoist groups, inadvertently helping to fund a threat to the state.

Ore miners have been oppposing higher taxes, saying that high duties or attempts to restrict the grade of ore being exported can deny the country of valuable dollar earnings.

Source : The Telegraph