Economic Times : Duty hike for fines will not help domestic sales

Industry News 2010-05-05 12:21:07

 

Source: Jaideep Mishra /Economic Times

 

There is needless policy confusion over the issue of mineral exports, even as international prices are hardening and touching a new levels-or perhaps because of it .On the one hand, the mines minister is reportedly keen on the levy of “windfall” export tax on iron ore exports. On the other, the commerce says there is no such proposal ,certainly as far as export of iron fines –which make up the bulk of ferrous exports is concerned.

 

He adds that when it comes to export of iron ore lumps, there would be a “marginal” increase in the levy .Note that at present the export duty on lumps is 10%, and 5% is the rate of fines reports say that the duty on ore lumps could go up by another 5%.

 

To the extent that ore exports preclude domestic value addition and taxes, an export duty makes sense . However, the big picture of benefits and costs of ferrous exports needs to be kept in mind .Iron ore exports now add up to just over to 100 million tones per annum, but much of it is of low value fines-over 85% in fact. Note that iron ore fines are mostly unusable at steel plants in India because of lack of sintering facility and requisite technology. The proposed JV plant of Sail in Jarkand, with Korean major Posco, would reportedly make use of the latter’s finex technology-basically, the use of fines sans sintering.

 

So within adequate sintering capacity and ready availability of finex-technology using operational plants domestically, the reasoning that a duty hike for exports of fines would increase supply of ore for steel mills here would not quite stand up to scrutiny, especially in the short to medium term .As for export of superior lumps, a higher export duty is warranted as an disincentive against exports and to step up domestic availability. Note that iron ore export price have hit the range of$120-160 per tonne , up 90% from a year ago.

 

A yet merely hiking export duty on ore so as to boost domestic supply would be too little too late.

What’s required is across the board reforms in mining .Note that the center plans to change some of the extant rules at the margin to coagulate much needed mining investments instead of simply

Tweaking the norms, what’s called for is fundamental overhaul of mining policy so to rev up transparency and efficiency levels in the minerals economy.

Given that the entire sector is rife with routine opacity and we have a perverse case-by –case.

Approach when it comes to okaying mining proposals, contemplating a series of half measures and sundry tentative policy would hardly do.

 

However ,the move to modify the tortuous process for issue of no objective certificate for undertaking mining activity ,for instance ,does seem logical, as is the provision to enlarge mining area size and attendant guidelines .yet the fact remains that across minerals and mining segments , there’s much ad-hocks and subjectivity involved ,whether its foraying into reconnaissance, essaying mineral prospecting or seeking grant of mining lease. More predictable policy, please.

 

 

 

 

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