Saying that restrictions on mining of iron ore in Karnataka and Goa has led to a steep drop of 35 per cent in its output, the steel ministry has asked the finance ministry to continue with the 30 per cent duty on ore exports while abolishing the import duty in the Budget next month.
Portraying a grim picture on paucity of iron ore, the ministry has argued that adequate availability of the mineral is imperative as it is the lifeline of steel production. A 35 per cent dip in output over past 4-5 years has triggered concerns within the steel industry.
This steep fall in ore output is primarily due to restrictions imposed on mining in the two largest ore producing states — Karnataka and Goa along with output curbs by Orissa. The country used to produce 200 million tonnes of iron ore a year and exported 50 per cent of it before the Supreme Court imposed a ban on exploration in Karnataka to curb illegal mining in 2011. This raw material insecurity in certain areas of the country is likely to accentuate further as fresh capacities come into production, the steel ministry has told the finance ministry as per its Budget 2014-15 wishlist.
Although iron ore exports have progressively dropped form 117.37 million tonne (MT) in 2009-10 per annum to 12.24 MT in 2013-14, its production has also slided from 218.65 MT to 145.48 MT in the same period which neutralised the benefits of lower exports for the domestic steel producers.
Moreover, to offset the scarcity due to lower production, the steel makers resorted to imports which shot up to 1.87 MT in 2010-11 and then came down to 0.37 MT in 2013-14, the steel ministry said.
“Accordingly, it is recommended that the export at 30 per cent in case of iron ore (both lumps and fines) and 5 per cent in case of ore pellets may be continued whereas the existing import duty of 2.5 per cent for iron ore and pellet imports may be brought down to zero,” the ministry said in its recommendations. It has also suggested that the custom duty on stainless steel products be increased from 5 per cent to 7.5 per cent primarily due to a surge of their imports from neighbouring China.
Imports of stainless steel flat products have increased form 14,890 metric tonne in 2009-10 to 1,30,440 metric tonne in 2013-14. Since significant capacities have been added and the existing plants are running at 36 per cent of their total capacity utilisation, there is a clear case for upping the custom duty, the finance ministry has been told.
In another significant recommendation, the ministry has suggested that steel plants running on natural gas as feedstock fuel are sourcing gas from abroad at 5 per cent custom duty. The steel makers are compelled to import Liquefied Natural Gas as domestic gas is supplied on a priority basis to fertiliser and power sectors. But considering that the prevailing high price of LNG in the global markets threatens to make steel making an unviable exercise, the government should consider “abolishing the import duty of LNG for steel making,” the steel ministry told the finance ministry.
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