The government is likely to scrap the ten per cent export tax levied on low-grade iron ore in view of the falling global prices and the lack of demand for such ore among domestic steel producers, giving a fillip to the economy of Goa.
“The steel ministry, which plays a critical role in formulating policies for iron ore, has now recommended that the low-grade iron ore could be exempted from tax as it won’t impact the interests of the domestic steel industry,” said a senior government official familiar with the matter. “Iron ore prices were much higher when these taxes were imposed but are hovering around $40 a tonne now with China’s steel production slowing considerably,” the official said.
Even China had decided to slash export taxes on high-grade pig iron ore to ten per cent from 20 per cent from January 1, he said.
“From October 2015, we had already allowed State-owned National Mineral Development Corporation to export iron ore of any grade at a concessional ten per cent tax to Japan and South Korea under long-term agreements,” the official said. This was despite the tax rate remaining 30 per cent for other higher grade iron-ore producers.
Another senior official confirmed the steel ministry’s suggestion and said the mines ministry also supported the proposal but the ministries of commerce and finance would need to take a stand on the issue before a final decision was taken.
“Scrapping the tax on low-grade iron ore won’t have to necessarily wait for the upcoming Union Budget as a decision on it can be taken even earlier,” the official said.
Finance Minister Arun Jaitley had reduced the export tax on such low grade iron ore, with ferrous content of less than 58 per cent, in the 2014-15 Budget from 30 per cent to 10 per cent in a bid to revive mining activity in Goa.
Over 85 per cent of the iron ore produced in Goa is of low-grade but all mining activity had stopped in September 2012 following the environment ministry’s decision to withdraw green clearances for iron ore mines in the wake of Justice MB Shah Commission’s report on illegal mining. The clearances were reinstated last March and the first iron ore shipment despatched in October 2015.
The State government has been seeking the withdrawal of the export tax on iron ore, especially since it shutdown the mines from 2012.
The closure hit its economy severely with the Goa Port also running into losses owing to the decline in exports. Overall taxes on low-grade iron ore from Goa add up to 40 per cent which includes royalty (15 per cent), district mineral fund contributions (4.5 per cent), the Goa Permanent Fund (10 per cent) and the ten per cent export duty.
Prior to its closure, the mining industry contributed over a quarter of the state’s economic output, employing around 1.5 lakh people directly and indirectly.
Ore exports from Goa used to rake in seven billion dollars per annum of foreign exchange, according to the Goa Mineral Ore Exporters’ Association.
Compared to Goa, over 90 per cent of the ore produced in the other four major states producing iron ore — Chhatisgarh, Odisha, Karnataka and Jharkhand — is of a higher grade with ferrous content of more than 60 per cent.
Source: Thehindu