India considering cut in iron ore export tax: sources

India is considering scrapping or reducing a 30 percent export tax on medium-grade iron ore after building up a stubbornly high surplus of the commodity, according to a document seen by Reuters.

India’s mining industry has lobbied for months for a cut in the duty after the country’s stockpile rose over the last five years to reach 149 million tonnes at the end of the financial year in March 2017.

It has stayed around that level, a senior mines ministry official said on Thursday, without wishing to be identified.

The duty is applied to ore with more than 58 percent iron, or Fe content.

The mines ministry favours either cutting or scrapping the tax but the steel ministry wants to maintain the levy at 30 percent.

“The major share of the stocks lying idle is … below 58 percent Fe grade iron ore fines and iron ore fines with Fe content of 60 percent to below 62 percent, which is a huge cause of concern for the miners as well as the ministry,” the mines ministry said in the document, which proposes a review of the export tax.

“The main objective of the committee is to assess whether a reduction/abolition in export duty in iron ore is required in the current economic scenario and if required, its impact on production, consumption, price elasticity of iron as well as its domino effect,” it said.

The ministry has circulated its document to the steel, finance and commerce ministries for discussion.

The steel ministry, however, has opposed cutting the duty amid concerns in the steel industry that a lower export duty could lead to a domestic shortage of iron ore, two steel ministry officials, who also spoke on condition of anonymity, said.

“We should look at value-addition such as pelletisation of the ore to generate demand from the stockpile,” one of the officials said. Pellets are mostly used for the production of sponge iron in gas-based plants.

“There is one more meeting to be held soon, where we are likely to take a decision and send it to the minister of mines for his comments,” the mines ministry official said on condition of anonymity, as the discussions have not yet been made public.

The commerce ministry will make a final decision on the matter.

The government may decide to cut the duty in its 2018/19 budget statement, likely in February, the mines ministry official said.

“If the decision is too close to the budget, it might be announced then,” the official said.

The ministries of finance, steel, mines and commerce did not immediately respond to Reuters emails seeking comment.

Local media recently reported that the government of Goa had sought a separate exemption from export duty for the low quality iron ore found in the state.

“There is no buyer below 63 percent Fe, as (local) steel companies don’t buy,” said R.K. Sharma, secretary-general of the Federation of Indian Mineral Industries in New Delhi, which supports abolishing the export duty.

“To some extent, Indian iron ore will become competitive if the export duty is removed,” Sharma said.