Top domestic steelmakers have begun lobbying with the government for an effective raw material policy, including removal of 2.5 per cent import duty on iron ore, in the face of an ongoing mining crisis.

The move comes even as the Federation of Indian Mineral Industries (FIMI), an apex body of 400 private mining firms, has urged the union commerce ministry to withdraw 30 per cent export duty on iron ore.

With the newly-elected Modi government initiating deliberations with various industry bodies ahead of its first budget, key stakeholders in the steel industry seem to be presenting completely divergent demands.

"The industry is operating at 80 per cent capacity utilization due to constraints in mining. This is also leading to higher domestic prices of iron ore. We should take adequate steps to ensure availability of iron ore. In this context, we should restrict exports of iron ore. The latter only leads to creation more jobs in foreign countries, at the expense of jobs and our manufacturing sector. This is a call we need to take as a nation," Jayant Acharya, director (marketing) JSW Steel, India's leading private steelmaker said.

An official of another private steel major said: "In the present situation of iron ore shortage, government should mull the decision of abolishing the import duty on iron ore. Mining companies are taking undue advantage of scarce supply owing to temporary closure of mines in Odisha due to non-renewal of years-old leases. This has resulted in iron ore prices shooting up by Rs 500 per tonne. Even state-owned mining companies have increased the prices. It has a direct impact on steel making costs which has gone up Rs 1,000 per tonne. The situation is precarious, wherein availability of iron ore itself has become a matter of concern. If the duty on iron ore export is reduced, it will be put the steel industry in jeopardy."

However, in its communication to the commerce ministry, FIMI secretary general R K Sharma made a strong pitch for removal of the existing 30 per cent duty on exports. "The total requirement of fines in the country is estimated at 40-50 million tonne (mt), the balance amount would be surplus. To meet domestic demand for lumps, the mining industry took advantage of the growing demand from China and raised production so that surplus fines could be exported. Almost 93 per cent of iron ore exports were to China almost all as fines," FIMI said. Due to high duty, exports of iron ore are estimated to have fallen from 117 mt in FY10 to 14.4 mt in FY14. "Steel industry, however, did not gain from a perceived glut of iron ore in the market. Without evacuation of surplus fines, production of lumps could not be maintained. There was sudden shortage of lumps which the steel industry had to import," FIMI added.

Source:The Economic Times