Iron Ore Export Duty: States Face Rs 16,000 Cr Loss

New Delhi, Sep 17 (PTI) Mineral-rich states like Karnataka, Goa and Odisha will incur a loss of over Rs 16,000 crore and the mining industry will become unviable if a 30 per cent export duty is imposed on low-grade iron ore, miners' body FIMI has cautioned.

The proposed export duty, FIMI said, would also lead to a widespread impact on the livelihoods of almost half a million people dependent on the industry.

"The proposed imposition of 30% export duties on low-grade iron ore (<58%Fe) has caused considerable disquiet in the iron ore mining industry. If the government of India goes through with the proposal then states are looking at a loss of over Rs 16,000 crores with large swathes of the mining industry being rendered economically unviable," the Federation of Indian Mineral Industries said in a statement.

There have been reports that the government was considering raising the export duty on low-grade iron ore between 20 and 30 per cent, from zero now.

The proposed duties are aimed at increasing domestic supply and at a considerable impact on the entire iron ore industry, hence, in this backdrop, it is pertinent to examine the issue of maximum permissible annual production (MPAP) restriction imposed on iron ore mining in Karnataka.

A reasonable approach on this interlinked issue can see a win-win outcome for all concerned, it said.

MPAP is a mine-wise production cap imposed exclusively on iron ore mines by the Supreme Court in 2013, for all iron ore mines of Karnataka due to gaps in the regulatory and monitoring mechanism that existed more than a decade ago.

MPAP was not meant to be a permanent constraint. It was a corrective measure to address specific issues prevalent at an earlier time. No other state in India has been subjected to such a production cap, making Karnataka the only mineral-rich state operating under this unique limitation.

"MPAP was a welcome move when it was imposed. Today the entire regulatory dynamics of the iron ore industry has transformed, and it is time to reconsider the efficacy of the MPAP and its continued imposition. In addition to being discriminatory, it has resulted in severely stunting the growth of the iron ore production and, by extension, impacted the domestic steel industry as well.

Removing MPAP in its entirety is one of the key measures needed, along with reconsidering the aspect of imposing export duties on low grade iron ore. Both these aspects, if not managed well, together have the potential to severely hinder and impact the mining and steel industry," Director FIMI (South) SS Hiremath said.