Goa Blog

Already reeling under the pressure of worldwide recession, coupled with an unstable rupee-value, the Goan mining industry in the private sector feels further jolted by the latest review of the export duty on iron ore.

Mr Shivanand V. Salgaonkar, President, Goa Mineral Ore Exporters’ Association (GMOEA), a body representing iron ore exporters, described the latest decision of the Union Finance Ministry, wherein duty on the iron ore fines has been revised to a flat rate of Rs 200 a tonne, as “doom for the Goan iron ore exports”.

Mr Salgaonkar described the exercise as “lack of application of mind” as he argued that by raising the duty on low grade ore, the export of which needs to be encouraged as it cannot be used for the domestic steel industry in a big way, the Goan exports have been severely hit.

Goa, he said, exports high proportion of low-grade fines, which in the new situation would become unprofitable and consequently, hit the entire industry, including their investments in the near future. Goan iron ore export, which has seen a drastic drop in the past few months due to a slump in demand from China, will be hit further.
Duty tab

While the existing export duty on iron ore was 15 per cent ad valorem, the Ministry has now retained 15 per cent ad valorem on lumpy ore, but has revised the export duty on iron ore fines (ore of less than 6 mm) to a flat rate of Rs 200 a tonne.

Goan ores are predominantly low-grade ranging from 52 per cent to 59 per cent iron. Moreover, nearly 80 per cent of the Goan ores are fines and cannot be used for domestic steel consumption, said the GMOEA sources.

“The Goan mining industry would be hit to the extent of virtually shutting down,” said Mr Salgaonkar, who is also the Managing Director of Salgaonkar Brothers Ltd, one of the leading iron ore miners and exporters of Goa.

At the present rate of Rs 200 a tonne, the increase is 30 to 90 per cent, depending upon the grade of the ore, he stated.

While the amendment in the export duty is expected to benefit producers of high-grade ore as the high-grade order commands a higher price, it would affect producers of low-grade ore to the extent that they would be forced to close down. “The Government’s move will cause exports to plummet further,” he added.

“For the past three months, the prices of ore have come down by at least 60 per cent and are on the decline. This will further deepen woes,” he said.
Job worries

The net effect in the increased duty, Mr Salgaonkar claimed, could lead to unemployment, as thousands of people are employed in mines, barges, trucks and repair workshops. About 12,000 trucks operate within the ore industry in the State.

Besides this, operations at Mormugao and Panjim ports would be dearly affected, he argued.

The Goa Mineral Ore Exporters Association has decided to petition the Union Government to correct this anomaly and do away with export duties on low-grade ores, as low-grade ore is unfit for any domestic consumption.

Mr Salgaonkar explained that a few exporters have already booked vessels for below 55 grade ore and considering the impact of the revised duty, which would be around $4-4.5 a tonne (even considering the rupee rate fluctuation) in today’s distressed world market for the iron ore, the exporters would have to pay the duty ‘out of pocket’. “This is being ridiculous,” he remarked.

According to industry projections, the slowdown in the Chinese steel market has meant that Goan iron ore exports of Goan origin ore, which amounted to 33 million tonnes (mt) last year, would slide down to 22 mt. The latest duty structure would further dent exports, the industry sources apprehend.

Courtesy: The Hindu