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Iron ore industry opposes cess, ban on exports

Prakash Kamat

Goa mineral ore exporters dub proposal as `illogical'

The production and investment costs for mining have gone up considerably.
The cess on iron ore exports is rarely used for its intended purpose
Not much value addition is taking place domestically, so the only viable solution for the mining sector is to export.

Panaji , Sept. 29

Goa's iron ore mining industry, the country's only private sector iron ore export industry, is opposed to the proposals recently mooted by the Associated Chambers of Commerce and Industry of India (Assocham) for a cess on iron ore exports and a phased ban on iron ore exports.

"With the production costs spiralling and investments for mining also going up considerably, the illogical proposal of a cess of Rs 500 a tonne would throw the industry out of gear," a spokesman of the Goa Mineral Ore Exporters' Association (GMOEA), the body representing iron ore exporters in the State, told Business Line on Thursday.

The Goa Chamber of Commerce and Industry (GCCI), the body representing industry and trade, is also backing the iron ore industry.

The latter has taken a decision to lodge protest with Assocham over its failure to take GCCI into confidence.

`Against cess'

"We feel strongly about it especially since around 40 per cent of India's iron ore exports are through Goa," a spokesman of the GCCI said. "We are against imposing of cess for iron ore exports, as the cess is rarely used for its intended purpose," said he.

The GMOEA official said the cess "would kill the industry". "What the opponents of the iron ore exports (of the country) fail to appreciate is that of the total ore exports, close to 70 per cent are actually fines and after handling, additional 10-15 per cent generates into fines, which makes it around 85 per cent. The situation in Goa is not any different," he said and argued that in any way this could not be utilised for value addition domestically.

He said the Federation of Indian Minerals Industries (FIMI) has last week made a presentation to the PMO on the controversial exports issue.

Rise in demand

The GMOEA's argument is that only in the last 3-4 years demand for iron ore had shot up considerably in the international market due to a spurt spurt in China's steel production. Since not enough value-addition is taking place domestically, the only viable solution for the mining sector is to export. It was pointed out that of the total of around 175 million tonnes of annual iron ore production, 85 million tonnes is consumed domestically while the rest - around 54 per cent - is exported.

"The issue at hand is not enough capacity to utilise the ore domestically and it is also not likely to be built in the next couple of years," said the official.

As for Goa, the GMOEA also pointed out that the local industry is augmenting capacities in recent years only to meet the demand. Moreover, much of the ore exported is low grade.

Economy's backbone

The GMOEA also questions the timing of the attack on exports. "With steel growth in the country lagging at about 7 per cent, the demand for iron ore has not increased domestically. Exports at present are fuelled by demand from China," said GMOEA official.

For Goa, the iron ore export industry has traditionally been a backbone of the economy with large number of people dependent on it directly and indirectly. It has been a major foreign exchange earner with around Rs 1,800-2,000 crore annual earnings.

The industry sources termed Assocham's proposal "illogical". "In reality, there is a surplus of iron ore produced in the country, so there is no dearth of availability of ore for future domestic consumption," the source said.

Goa's ore exports, which include ore coming from neighbouring States, rose from 32.6 million tonnes in 2004-05 to 36.2 million tonnes last year. Its main exporters include Sesa, Dempo, Salgaocar, Chowgules and Timblos who supply iron ore mainly to China, Japan and other countries such as Netherlands, Romania, Turkey, besides South Korea, Taiwan, Pakistan, Kuwait, Qatar, UAE, Oman and Kenya.

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