KOLKATA (miningweekly.com) - The Indian government is preparing to cut iron-ore export duties from 30% to 20%, with the country’s Finance Minister throwing his weight behind restarting stalled mining operations and exports.

The country’s highest-level economic policy-making body, the Cabinet Committee on Economic Affairs (CCEA), was scheduled this week to take up the issue of pruning the export duty and reconciling differences within government, the Steel Ministry and large sections of the steel-making industry opposed any move to reduce the duty.

Clearly indicating his position on the debate within the government, Finance Minister P Chidambaram said last week that the country had to export iron-ore.

“We need to restart iron-ore mining,” he said, portraying it as series of initiatives to step up inflows of dollars and as a panacea to the high current account deficit (CAD) ailing macroeconomic indicators.

Mining Weekly Online previously reported that the government would shortly be seeking Supreme Court views on restarting iron-ore mining in the Indian provinces of Karnataka and Goa, which the Court had banned following widespread illegal mining.

Meanwhile, in the debate on whether to reduce export tax or not, the Commerce Ministry, which is in favour of a cut in export duties, pointed out in a note circulated within the CCEA that iron-ore pithead stocks had increased 62%, to about 120-million tonnes, during 2012/13 across the provinces of Odisha, Jharkhand and Karnataka, adding that boosting exports through cuts in taxes would in no way impact raw material availability to domestic steel producers.

The Commerce Ministry also pointed out that domestic steel production required calibrated lump ore and since the bulk of the iron-ore production from mines were fines, higher exports and raw material security from domestic production were not closely linked.

However, a Steel Ministry official said that a high export duty on iron-ore was necessary to conserve precious natural resource for the long-term use of the domestic industry. This would also facilitate the realisation of a growth strategy for domestic production of finished steel of 300-million tonnes a year by 2025, which had been endorsed by the National Manufacturing Competiveness Committee headed by the Prime Minister.

But with the Finance Minister, a senior member of the CCEA, backing a restart of iron-ore mining and boosting exports, it indicated that the government’s priority was to increase foreign currency inflow to address the CAD in view of its short-term urgency, rather than pursue the long-term objectives of conservation of natural resources, another government official pointed out.

He said that it was also the opportune moment to boost iron-ore exports through lower taxes considering that Indian export offers for iron-ore fines (with iron content of 63.5% and above) had rallied to levels in the range of $137/t and $138/t last week, riding on aggressive restocking by Chinese steel mills, compared to export offers in the range of $120/t and $122/t in early July, adding that local miner-exporters should not miss the current bull run in international markets and exploit opportunities for higher dollar earnings for the country.