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FIMI calls for removal of tax on export of iron ore

Federation of Indian Mineral Industries has renewed its demand for a rollback in export duty so that mining companies would be able to sell low grade ore to steel mills abroad.

In a recent letter to the Prime Minister and finance minister, FIMI argued that “Iron ore exports have become unviable and a loss-making proposition after the hike in export duty and sharp fall in international prices by more than USD 60 a tonne from its peak. With a logistics cost of 45% of the net realization (39% railway freight and the other six per cent on movement from mines to sidings and demurrage), 10% royalty on the price declared by the India Bureau of Mines and 10% port cost, margins have turned negative for the industry.”

Mr RK Sharma secretary general of FIMI said that exports are expected to be half of last year’s, while there is no corresponding increase in domestic demand and lower production, so the respective state governments are getting less royalty. Moreover, there will be lower economic activity.

He said fines were co produced with lumps while mining ore, in a 70:30 ratio. So, for every production of a tonne of lumps, about 2.5 tonnes of fines are produced.

There is not enough demand for fines in the domestic market and, hence, these have to be exported. Around 90% of iron ore exports are fines; lumps are 8%. If export of fines is not allowed, this may lead to closure of mines or lower production. This would mean the prices of lumps may rise in the domestic market, hampering the steel industry and inducing inflationary pressure.

Hence, FIMI said that there’s also a need for better utilization of fines in the domestic market through polarization and ensuring that future steel plants are fines oriented.