Assocham supports export duty on iron ore

New Delhi, Mar 11: Contradicting the demand of the mining sectorto withdraw the Rs 300 per tonne export duty on iron ore, industry BodyAssocham today said the proposed duty will not have any dent in theprofitability of exporters.

Complimenting Finance Minister P Chidamabaram for his proposal toimpose the duty in Union Budget 2007-08, the chamber infact proposedthat the Rs 3,000 crore revenue which will be generated out the levy beutilised for long-term exploration and expansion needs of the domesticindustry.

India exports nearly 100 million tonnes (MT) iron ore in a year.

Assocham pointed out that state-owned iron export company NMDC hasposted 90 per cent operating profit in the financial year 2006-07.Majority of the iron ore exports are on spot basis which indicates thatcompanies in this space are making even higher profits.

The increase of Rs 400-450 per tonne prices in the spot market isfurther going to swell the profitability of iron ore exportingcompanies.

''Rather it (profitability) will witness an increase of Rs 150 pertonne of iron ore after deducting Rs 300 per tonne from the priceincrease of Rs 450 per tonne,'' it added.

As per the chamber's estimates, Iron ore prices have registeredunprecedented price increase since 2004-05 on the back of huge demandfrom China and buoyant steel industry.

The iron ore prices which were in the range of 51-57 dollars pertonne on spot basis last year in different parts of the country havegone up to 9-10 per tonne in February 2007 after the finalisation oflong term prices, which saw an increase of 9.5 per cent. The spotprices are ruling at 61-67 dollar per tonne FOB.

China has imported 155 MT iron ore from Australia, 115 MT from Brazil and 85 MT from India in the year 2006.

According to the chamber, India has great logistical advantage ascompared to Australia and Brazil for iron ore export to China. Thefreight component for iron ore export from India to China is lower by15-18 dollars per tonne as compared to the freight from Brazil andAustralia.

It also said iron ore security is vital as a developing nationlike India would be producing and consuming over 250 million tonnes ofsteel in near future.

Various steel industries have already signed 140 MoUs for steelproduction, most of them are pending for execution due tonon-availability of iron ore and land.

Assocham President Venugopal N Dhoot said the country shoulddiscourage export of raw materials, especially iron ore, and strengthenits manufacturing base to generate employment opportunities.

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