KOLKATA (miningweekly.com) - The Indian mining industry is sharply divided on government policy on an export tax for iron-ore.

A section of the industry has called on the government to reduce the 30% export tax on iron-ore, justifying it on the grounds that there is sufficient availability of resources, while another section has told government that it prefers the status quo on the grounds that a shortage of the raw material exists.

The Confederation of Indian Industry (CII), the largest industry representative body, has urged the government to reduce the export tax as it avers that India had sufficient iron-ore resource to meet the present and foreseeable future demand of local steel producers.

In sharp contrast, another leading industry representative body, the Associated Chamber of Commerce & Industry of India (Assocham) in a communiqué to Commerce Minister Nirmala Seetharaman said that the current rate of export duty should be maintained as exports were draining the country of critical natural resources and local industry were facing the brunt of shortages.

Rationalising its demand, Assocham said that while international iron-ore prices had slumped 30% since April 2013, the domestic price of ore had increased 25% during the same period leading to shortage of supplies and making Indian steel producers uncompetitive.

However, the CII has taken an opposing stance.

“There is enough iron-ore for the growing Indian steel industry. The export duty should be reduced,” CII’s chairperson of the National Mining Committee Nik Senapati said in a statement. He was also head of Rio Tinto’s operations in India.

He advocated speedier reopening of closed iron-ore mines across Goa and Karnataka adhering to norms laid down by the Supreme Court to increase supplies instead of curbing exports through fiscal measures.

As for Assocham, the industry body also reiterated its demand for a hike in export duty on iron-ore pellets.

“As exports of iron-ore pellets have risen to a massive 1.5-million tonnes during 2013/14, compared to negligible quantities in the previous fiscal, the government needs to raise the export duty on ore to ensure iron-ore security for the Indian steel industry,” Assocham said in a press release quoting from the memorandum submitted to the Commerce Ministry.

Last year, the Indian government imposed a nominal 5% export duty on iron-ore pellets. Exports of iron-ore lumps and fines attract a levy of 30%.

Assocham has sought Commerce Ministry intervention to bring the export tax on pellets on par with taxes on lumps and fines, while maintaining the current rate applicable for the latter.

Indian iron-ore production had fallen steadily over the last few years from about 218-million tonnes in 2009 to 144-million tonnes in 2013/14, and was forecast to fall short of 100-million tonnes in the current fiscal year against a demand of 140-million tonnes from domestic steel producers.