Indian Mines Ministry Seeks Lower Iron Ore Tax to Clear Stocks

India’s mines ministry is seeking a lower export tax for iron ore, helping Sesa Goa Ltd. (SESA), NMDC Ltd. and rival producers of the raw material clear stockpiles amid waning demand and prices in China.

The ministry will recommend lowering the 30 percent tax on low-grade iron ore fines to the finance ministry, Mines Secretary Vishwapati Trivedi said in an interview, without elaborating. Rising freight costs and a drop in prices have inflated stockpiles, increasing pollution, he said.

“Iron ore fines are rarely used by the local steel industry and stocks are piling up at various mines,” Trivedi said. “It’s damaging to the environment. A lower tax on exports could help companies ship these stocks out.”

Indian iron ore companies have been weighed down by government moves to restrict output in two of the nation’s biggest ore producing states to check illegal mining and environmental breaches. A 30 percent export tax and weakening sales to China are expected to reduce exports to the lowest in 12 years in the year ending March 31, the Federation of Indian Mineral Industries said.

Shares of Sesa Goa, a unit of Vedanta Resources Ltd. (VED), gained as much as 1.2 percent to 178.40 rupees and traded at 177.70 rupees as of 12:09 p.m. in Mumbai. The stock has gained 7.9 percent this year, compared with a 20 percent surge in the benchmark Sensitive Index. (SENSEX)

Falling Prices

Ore containing 62 percent iron has fallen 24 percent this year at China’s Tianjin port, a global benchmark, as the nation’s economy slowed. Ore prices that neared a three-year low on Sept. 5 rallied 21 percent after China announced plans to build more subways and highways, projects that Nomura Holdings Inc. estimated would cost about 1 trillion yuan ($158 billion).

Economic growth in China is expected to accelerate toward the end of the year as the biggest global metals consumer eases credit restrictions and boosts spending, David Peever, managing director of London-based Rio Tinto Group’s Australian business, said today.

Low-grade Indian fines are used mostly by steelmakers in China that have the facility to use them in their furnaces. Indian mills typically use high-grade lumps.

“A cut in export taxes alone won’t boost shipments,” said R.K. Sharma, secretary general at the Federation of Indian Mineral Industries. “Higher export taxes and lower prices have made Indian shipments unviable, leading to a cut in output and layoffs at mines.”

India’s ore exports may drop 33 percent to 40 million tons in the year to March 31, Sharma said on July 3. The association has also sought a cut in export taxes from the finance ministry, he said today.

Goa Stockpiles

Goa, India’s biggest iron ore exporter, alone has iron ore stockpiles of about 700 million tons, G.S. Gundewar, controller general at Indian Bureau of Mines, said today in an interview. Some of this stock has iron content of 45 percent or less and needs to be processed for consumption.

India’s Supreme Court imposed a ban on mining in the southern state of Karnataka in July last year, citing environment degradation due to mining. The court’s decision followed the state ombudsman’s report saying illegal mining and sales of the mineral by companies including JSW Steel Ltd. (JSTL) and Adani Enterprises Ltd. (ADE) in the state had caused a loss of 160 billion rupees ($2.96 billion).

Last week, the western state of Goa, which exports more than half of India’s iron ore, banned all mining after a panel said the province’s government lost an estimated 349.4 billion rupees because of illegal mining. Goa will permit exports of the material from the first week of October, the Press Trust of India reported on Sept. 12, citing Chief Minister Manohar Parrikar.

To contact the reporter on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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