How Indian Export Duties Are Forcing Iron Ore Pellet Production

The stiff 30-percent export duty the federal government clamped on iron ore exports rendered Indian exports uncompetitive in the global markets. The previous export duty level was 20 percent.

One can understand the severity of the hikes from the fact that just in February 2011, the duty stood at a mere 5 percent.

In a sense, the Indian government’s move to discourage exports to protect its supplies for domestic consumption has backfired. It was the high international prices for iron ore which had led to a suspicious government here, twice hiking the export duty to stop illegal exports, in the first place.

A slump in the global prices by as much as 20 percent since July has paid put to this plan. The high tax coupled with the state-owned miner NMDC’s new price mechanism are now seen to be working against the interests of the mining companies, at least on the export front. Many major steel companies like JSW Steel that do not have captive mines of their own have to rely on NMDC’s stock.

The Business Standard report, while quoting unnamed sources, said iron ore fines exports were down to a level that was a fraction of what it used be a couple of years ago. Some of the miners, explaining their reasons for going into pellet production, said the iron ore fines were previously being shipped out as the Indian steel industry did not have the technology to use it.

Most of this consignment was landing up in China. But if the material was converted into pellets, then it could be used by the Indian domestic industry. Iron ore fines account for 60 percent of India’s ore exports.

On May 27 this year, after reviewing the status of various steel projects in Odisha, the Industrial Infrastructure Development Corporation of Odisha (IDCO) had given approval to pave the way for an iron ore pellet plant.

By Sohrab Darabshaw