Mining, export policies costing India world market: Minister

The Union Ministry of Mines has raised an alarm over the Centre’s iron ore mining and export policies, stating that the policies were beginning to adversely impact iron ore fines production in the country.

In a letter to Finance Minister P Chidambaram ten days ago, Minister of State for Mines Dinsha Patel made a strong pitch for rolling back enhanced duty on iron exports, which was essential to reverse sharp fall in iron ore production in the country.

“There is an immediate need to roll back the export duty on (ore) Fines to 15 per cent on ad valorem basis for restoring iron ore productions, and supplemented suitably with rationalization of railway tariffs,” Patel wrote in his September 13 letter.

The export duty on iron ore fines was increased twice since 2011 -- from 5 per cent to 20 per cent in the first instance and, more recently, to 30 per cent. Due to these increases, Patel said in his letter that “the exports have shown a drastic decline in 2011-12 from 123.43 million tonnes in 2009-10 to 57 million tones in 2011-12”. This has led to loss of customs duty to the Centre and royalty revenues to states, he added. 

In recent months, the mining industry has been making its case for slashing duty cuts as they have lost export markets because of the high cost of iron ore fines export from the country. Besides, the industry is also plagued with large-scale corruption in iron ore mining involving private players, politicians and bureaucrats.

“The Ministry of Mines is of the opinion that one of the primary reasons is the increase in the customs duty and railway freight on export on iron ores fines, which has made exports unviable resulting in piling up of ore at mine head slowing down production of iron ore,” Patel apprised Chidambaram through his letter.

Giving statistics to describe the seriousness of problem, he wrote that the mine head stocks had pilled up from 88.8 million in 2010-11 to 104.2 million tonnes in 2011-12, adversely affecting the production of ore.

As of now, Patel’s argument would only help make iron ore fines export attractive to the country’s mines exports as the country is technologically not sufficiently equipped to produce steel from fines. The minister said that availability of iron ore in the country is not an issue as the country has identified resource of 28.52 billion tonnes of ore as of April 2010.

Fines are high quality ore and are generated in mining along with lumps (Fines constituted 61 per cent of total production in 2010-11). Due to limitation on the area available for stacking fines the miners are forced to reduce their overall production if the fines are not removed from lease area, said Patel in the letter.

In the middle of Patel’s letter, the government has suddenly transferred Mines Secretary Vishwapati Trivedi to a less sought after post of Inland Waterways Authority chairman.

The transfer, which happened just a few months after Trivedi’s appointment as mines secretary, has raised eyebrows in the ministry, despite the  government made it as a routine exercise by clubbing his transfer with other bureaucratic reshuffle. Tourism Secretary R H Khwaja has replaced Trivedi, an official release stated on Monday.