JOIN USThe Associated Chambers of Commerce & Industry (Assocham) has cautioned the government against the renewed demand of a section of the mining industry for reviewing the current export duty structure on iron ore.
The structural deficit of iron ore availability for the domestic steel industry is owing to an upper cap in iron ore production coupled with various environmental concerns, Assocham said in a communication to Steel Secretary D R S Chaudhary on Monday. Rather, Assocham said, the government must stay vigilant and not repeat the saga of illegal mining caused by unrestrained iron ore exports and interests of the steel industry should be receive government’s attention.
“India has added huge capacity for agglomeration, that is pelletlisation and sintering during the course of the past few years due to the government’s decision to adopt fiscal measures to conserve iron ore resources against demand of the steel industry to ban iron ore exports,” said Assocham while hailing the government’s policy to conserve natural resources by imposing 30 per cent export duty on iron ore and differential railway freight for the domestic and export sectors.
India has got about 115 million tonnes (MT) of agglomeration capacity against the production of over 101 MT of fines considering that India produced about 170 million tonnes (MT) of iron ore in 2011, including over 66 MT of lumps and over 101 MT of fines, Assocham claimed. “Thus, the argument that India does not have enough capacity to utilize iron ore fines is incorrect and factually wrong,” the industry body maintained, adding that India is likely to have 170 MT agglomeration capacity (84 MT for pellet making and 86 MT sinter making capacities) by 2014.
Quashing recent reports that iron ore stocks in India have gone up from 88 MT to 104 MT in 2011, Assocham said that it is a misconception that stock levels of iron ore in the country have gone up after imposition of export duty.
It pointed out that iron ore stocks of 25 MT have been liquidated in Karnataka after suspension of mining by the apex court and iron ore stocks have also gone down by 8 MT in 2011, citing information on the Orissa government’s website.
Assocham has also claimed that merchant iron ore producers in Orissa are deliberately holding iron ore fines stock and selling the lumps at Rs 7,500-Rs 8,000 per tonne, making windfall profits in the process.
“It is to be noted that Orissa supplies iron ore lump to various sponge iron producers located in Jharkhand, Chhatisgarh and West Bengal; and, the eastern region has added about 21 MT agglomeration capacity, including over 15 MT pellet and over five MT sinter during the past five years based on supply of iron ore fines from merchant miners,” Assocham said.
It observed that merchant miners have adopted a strategy of selling lump only in domestic market and fines in China, thereby holding back fines’ stock and quoting abnormally high prices to pellet producers.
This is happening at a time when pellet producers are struggling to source iron ore fines with merchant miners not selling them in apprehension that pellet producers directly competing with their lump could cause significant reduction in prices, Assocham said.
MSME interest subsidy
Assocham also welcomed the Karnataka government’s announcement to provide 5 per cent interest subsidy to micro, small & medium entrepreneurs (MSMEs). J Crasta, co-chairman, ASSOCHAM Southern Regional Council, in a statement on Monday also welcomed the decision to enhance investment limits on projects that can be approved at district level by deputy commissioners.
He hoped that this would help cut down the time taken in according clearance to various projects. On the proposed interest subsidy for MSMEs, Crasta said that it was rather ironical that despite their crucial role in the economy, MSMEs have been saddled with high cost of funds. Even the cost of bank funds was much higher for MSMEs in comparison with largescale enterprises. It is equally important to usher in an enabling environment for industries as a whole and MSMEs in particular, he said.
The state government had taken an in-principle decision to withdraw applicability of trade license on industrial units, though a decision has not yet been notified. Similarly, industrial units have been asking for a differential rate of property tax on industrial units, but continue to be clubbed with commercial properties, Crasta said.