Assocham supports export duty on iron ore;says will not dent profits

New Delhi, Mar 11 (UNI) Contradicting the demand of the mining sector to withdraw the Rs 300 per tonne export duty on iron ore, industry Body Assocham today said the proposed duty will not have any dent in the profitability of exporters.

Complimenting Finance Minister P Chidamabaram for his proposal to impose the duty in Union Budget 2007-08, the chamber infact proposed that the Rs 3,000 crore revenue which will be generated out the levy be utilised for long-term exploration and expansion needs of the domestic industry.

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

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

The increase of Rs 400-450 per tonne prices in the spot market is further going to swell the profitability of iron ore exporting companies.

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

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

The iron ore prices which were in the range of 51-57 dollars per tonne on spot basis last year in different parts of the country have gone up to 9-10 per tonne in February 2007 after the finalisation of long term prices, which saw an increase of 9.5 per cent. The spot prices 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 as compared to Australia and Brazil for iron ore export to China. The freight component for iron ore export from India to China is lower by 15-18 dollars per tonne as compared to the freight from Brazil and Australia.

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

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

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

UNI