Govt to cut export duty on low grade iron ore, import duty on aluminium to be hiked
A iming to incentivise the domestic value addition as well as boost mineral export in the country, the government has proposed to remove duty on outbound shipments of low grade iron ore and raise the import duty on aluminium products. Finance Minister Arun Jaitley while unveiling the Budget for 2016-17 in Lok Sabha proposed reducing export duty on iron ore fines with Fe content below 58 per cent from 10 per cent to nil, while removing duty on iron ore lumps with Fe content below 58 per cent from 30 per cent to nil. Jaitley, who was presenting his 3rd budget, has also proposed that the Basic Customs Duty (BCD) to be increased for primary aluminium from 5 per cent to 7.5 per cent and that on aluminium products from 7.5 per cent to 10 per cent. Besides, government has also proposed to raise the BCD on Zinc alloys from 5 per cent to 7.5 per cent and for reducing export duty on bauxite -key ingredient in making aluminium -- from 20 per cent to 15 per cent, while in the case of chromium ores and concentrates, the import duty has been proposed to be cut from 30 per cent to nil. The move came after industries lobbied with government to check growing influx of cheap aluminium imports from countries like China as well as to enhance the competitiveness of low grade iron ore, which is mainly exported. Welcoming the Budget proposals, Steel and Mines Minister Narendra Singh Tomar said the decision to increase custom duty on zinc alloy will control the recent surge in imports. Removal of export duty on iron ore will encourage export of the ore, which is not being utilised in India and increase in custom duty by 2.5 per cent on aluminium will provide relief to the domestic industry, he added. He also expressed confidence the steel industry will benefit from increase in steel demand as a result of various decisions taken in the budget. "A new policy to expand LPG connections to the poor and needy particularly in the rural areas will help raise demand for LPG grade HR Coils. The industry will directly benefit from this," Tomar added. The target of 100 per cent village electrification by May 1, 2018, will boost demand of steel products such as poles, structural steel, wires, electrical steel, etc, he added. "A policy to provide 100 per cent FDI through FIPB route in food products produced and marketed in India will increase the need for storage for food products. This will increase the demand for containers and silos for storage, again indirectly boosting
steel demand," Tomar noted. The government's investment plan of Rs 85,000 crore in irrigation is expected to increased the demand for pipes and tubes, the Minister said. The government has been planning to reduce export duty on iron ore as it wants to revive mining industry, that is facing tough times due to softening global commodity market. Prices of the ore globally have plummeted to a decade low and there are few takers for the Indian iron ore. In case of aluminium, the Parliamentary Committee on Public Enterprises, last week, recommended hiking import duty on aluminium and raised "serious concern" on "adverse impact" of cheaper imports on the profitability of state-run Nalco. Of the total aluminium consumption in India, 55 per cent is met from aluminium scrap and 45 per cent from aluminium, on which import duties are 2.5 per cent and 5 per cent respectively, resulting in cheap imports from countries like China. Welcoming the tax rationalisation measures that provide requisite policy support to India's natural resources sector, meals and mining conglomerate Vedanta Group's CEO Tom Albanese said these actions will lead to increased mineral exploration in the country. Terming the scrapping of export duty on low grade iron ore as a step in the "right direction", Albanese said this would enable producers to achieve right value of the mineral to some extent in the present scenario of commodity downturn. Besides, the import duty hike to 7.5 per cent, will help the bleeding aluminium industry in capturing only some of the lost domestic market, he said adding "We expect more support from the government in the coming days to control dumping of aluminium into India from countries like China." Albanese suggested that the government should revisit doubling the cess on coal and lignite production as the increase will add to the woes of buyers and increase the input costs. In the present times of global commodity downturn, industries like aluminium will not be able to bear the burden. T h e Government’s intent on incentivising natural gas production from deep seas as well as providing calibrated marketing freedom to new oil and gas discoveries are steps in right direction for rejuvenating near stagnated domestic oil and gas sector, Albanese added. He also appreciated the proposed new policy on disinvestment of public sector firms, and simplification of policies. The CEO of Vedanta Group's Sesa Iron Ore in Goa Kishor Kumar said: "The Budget proposal to remove export duty on lumps and fines with iron content of less than 58 per cent has come as a big relief for the Goa iron ore mining industry." Kumar added: "It was much awaited as the sharp drop in global iron ore prices has eroded our margins. The removal of export duty will surely provide a big boost to iron ore exporters in Goa, who have been earning valuable foreign exchange for the nation." Industry body Goa Mineral Ore Exporters Association also welcomed the withdrawal of export duty on iron ore. GMOEA Secretary Glenn Kalavampara said: "In a highly competitive global iron ore market where prices are depressed, this reduction will certainly help our members in marketing their ores. It may also help in encouraging buyers to bid during the next round of e-auction." TV Narendran, the Managing Director of Tata Steel (India and South East Asia) said the budgetary proposals announced by the Finance Minister will help the industry meet its growth target and reach its full potential. "However, the doubling of Clean Energy Cess from Rs 200 to 400 per ton would further increase input cost for domestic producers," he added. Essar Steel India CEO and Managing Director Dilip Oommen said the Budget clearly seeks to achieve fiscal consolidation while giving boost to rural sector in terms of investments, employment generation and social benefits. "Emphasis on rural electrification, cooking gas connection to BPL families, infrastructure development has significant potential to drive steel demand. However, steel industry will have a cost push on account of the increased cess on coal," he added.