Union Governemnt raised Export Duty on Iron Ore Exports to 30 per cent from 20 per cent

The Union government raised the ad valorem duty (export duty) on iron ore exports to 30 per cent from 20 per cent. The decision is expected to step up finances of cash-strapped government by around Rs 8500-9000 crore. The Federation of Indian Mineral Industries, the apex body of miners however complained that Indian ore would no longer be competitive internationally.

The increase in export tax could lower the profit margin of Sesa Goa Ltd., India's largest iron-ore exporter by volume.

Steel Minister Virbhadra Singh always wanted more restrictions on exports. Based on his ministry’s inputs, Finance Minister Pranab Mukherjee had earlier imposed a 20 per cent duty on exporting the domestically mined mineral.

Shipments from the South Asian country decreased 28% between April and November to 40 million tons, according to the Federation of Indian Mineral Industries. Volumes were hit by a mining ban in the southern state of Karnataka, a freeze on sale of old stocks in western Goa state and transport bottlenecks in the eastern state of Orissa.

India exported 97.64 million tons iron ore in 2012.

Prior to the export tax change, industry officials had estimated exports in 2011-12 to be between 60 million and 65 million tons because of mining-related issues. As a result of high export tax and railway freight, India's iron-ore exports is not likely to exceed 50 million tons in 2011-12.

The Supreme Court had in early 2011 banned mining in the major iron-ore producing districts of Karnataka to prevent illegal mining and environmental damage. In Goa, moves to reduce environmental impact and illegal mining affected production. The two states account for around 70% of India's iron-ore exports.