Mumbai | September 5, 2016: In a fresh bid to claim the use of local iron ore entirely, the Indian steel industry has protested the government’s proposed move to reduce export duty on the steel-making raw material.

In a representation to the Ministry of Steel and Ministry of Mines, the Indian Steel Association (ISA), the representative body of the domestic industry, has urged the government to continue with the export duty at 30% on all grades of iron ore to preserve natural resources for local use.

The steel mills’ protest comes after the steel ministry’s official hinted at a relaxation in export duty to encourage shipment of iron ore from India. In fact, the government cut export duty on low grade fines to 10% earlier this year but continued with a 30% levy on lumps.

“Iron ore as a natural resource is India’s strength and for sustenance, expand and development of steel industry, it is essential to ensure adequate availability of iron ore for domestic steel industry to meet the rising steel production. Any relaxation in export duty at this stage will be detrimental to this sector,” said H Shivram Krishnan, Director (Commercial), Essar Steel India.

Iron ore production is lagging the growth of steel production in India. Data compiled by the Joint Plant Committee (JPC) under the Ministry of Steel showed India’s iron ore output recorded a negative growth with compounded annual growth rate (CAGR) of 6.51% over the last five years. Total iron ore output at 139 million tonnes in 2015-16 declined from the level of 208.15 million tonnes in 2010-11.

In contrast, steel output during the period grew 4.58% of CAGR despite global economic slowdown and thereby, its impact on infrastructure spends in India, resulting in a sharp decline in steel consumption. The JPC data showed, India’s steel output at 89.78 million tonnes for 2015-16 as against 68.62 million tonnes in 2010-11.

“Export should be valued added products and not the raw materials. The basic principal of the export should be to earn revenue which would come from finished products more than raw materials. India is a steel non-mature country (which means, steel consumption is low but rising). So, India needs steel for domestic consumption unlike steel mature countries (where no potential for consumption growth) like Japan, United States etc. For meeting our own consumption of steel, it is important to conserve iron ore to produce steel locally. We must focus on exports of value added products like pellets, finished steel etc. No developing country with growing economy dispatches raw materials,” said Sanak Mishra, Secretary General, ISA.

In fact, merchant miners actual realisation from iron ore exports work out to Rs 1,550 a tonne, less than half the price of landed cost of imported commodity. With existing duty, India’s iron ore exports stood at 6 million tonnes against its import at 11.3 million tonnes during FY 2016.

Steel mills’ capacity utilisation is averaging 76-78% of installed capacity of 120 million tonnes. On further increase in capacity utilisation, iron ore requirement would go up proportionately. Apart from that, the government’s aim to add 180 million tonnes of steel production capacity by 2025 will require 290 million tonnes of iron ore over and above the existing requirement of around 140 million tonnes including 25 million tonnes of pellet producers.

“Since iron ore mined by captive users like Steel Authority of India (SAIL) and Tata Steel is not available for exports, entire quantity of shipment would come from merchant miners only resulting into huge shortage of the raw material,” said a senior industry official.

Production status:

(Source : Joint Plant Committee, * Provisional)

(Source: http://www.business-standard.com/)