What's The Fuss About Iron Ore Export Duty And Why Does It Matter?

(MENAFN- Live Mint)

India plans to impose a duty on exports of low-grade iron ore, expanding a levy currently applied only to high-grade ore. The plan has upset companies that mine ore, but cheered steelmakers that use the ore in manufacturing. Mint breaks down the issue.

What has the government proposed?

The government is planning to impose a uniform export duty on all grades of iron ore, in a move to discourage exports and ensure ample local quantities for steelmaking . At present, exports of low-grade iron ore with less than 58% iron content are not taxed, while high-grade ores face a 30% export tax. With this move, the duty will now be extended to low-grade iron ores as well. It is expected to be implemented next month.

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Why do miners oppose the duty?

According to an executive from one of India's top ore exporters, the new duty will cause a revenue loss of at least ₹16,200 crore. Miners claim that low-grade ore is mostly exported-primarily to China- since many Indian steel firms do not have the technology to purify low-grade ore. Ironically, Indian ore accounts for only a small portion of what China imports, and the duty will have no impact on Chinese steel production, but will punish local miners, they say. Industry associations like the Federation of Indian Minerals Industry and the Goa Mineral Ore Exporters Association have requested the government to reconsider the plan.

Why do steelmakers welcome the duty?

According to steelmakers, cheap iron ore is exported to China and returns as cheap finished steel, hurting domestic steelmakers. Steelmakers argue the duty will ensure domestic availability of iron ore at lower prices, helping them make cheaper steel and turn globally competitive. An executive at a leading steel mill disputed the miners' claim that there are technological limitations with Indian steel companies. Several Indian steel companies have already invested in iron ore beneficiation plants which could utilize the low-grade iron ore, the executive said.

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What does the data say?

India's iron ore production rose 5% to 289 million tonnes in FY25, according to data from Big Mint, a market intelligence firm. Out of this, 66.3 million tonnes were of low-grade iron ore. Only 35% of low-grade production was exported. In FY25, the top exporters of low-grade iron ore were Rungta Mines and Vedanta.

Why does it matter?

Iron ore is used to make steel, and its cost directly affects steel prices. If iron ore prices fall, steelmakers will be able to produce steel cheaper. With this duty, the government intends to boost the supply of the mineral and reduce prices, which will subsequently make Indian steel cheaper. This will also help the steel industry tackle the issue of cheap steel imports from different countries like China, South Korea, Japan and Vietnam and be competitive with its global peers.

Also Read | India moves to shield steelmakers with duty on Vietnamese import

This move will also help India achieve its target of exporting 50 million tonnes of steel annually, strengthening its export basket with high-quality, competitively priced products.

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