MUMBAI/NEW DELHI Finance minister said on Friday there was no case to roll back the 30 percent duty on iron ore exports, a reversal of the government's earlier stance that could keep shipments lower but help availability for local steel mills.
Prime Minister Manmohan Singh and Finance Minister P. Chidambaram had earlier called for the need to find ways to revive iron ore exports, which have plunged over the past two years due to the high duty and a ban on mining in key states.
But speaking at a meeting of exporters in Mumbai on Friday, Chidambaram said there was a need to maintain the current duty but did not elaborate. In response to a question on the duty, he said there was "no case to roll back".
"If the finance minister is saying there is no need to cut the duty, I'm sure he has his reasons," said Basant Poddar, senior vice president of the Federation of Indian Mineral Industries (FIMI). "But we're disappointed and exports might hit single digits (millions of tonnes)."
India was once the third-largest exporter of the steel making raw material, but shipments slumped more than 80 percent in three years to hit 18 million tonnes in the last fiscal year.
That prompted Singh to say in July the government was trying to remove "constraints in the export of iron and other ores". The drop in shipments gave Australia and Brazil, the world's top two iron ore exporters, more business in No 1 buyer China.
The mines ministry and the commerce ministry had recommended cutting the duty to 20 percent to revive shipments and help narrow the country's current account deficit, although the steel ministry wanted to conserve iron ore for local mills.
But as the rupee has depreciated over the past few months, Commerce Minister Anand Sharma said earlier this month that most of India's exports were becoming competitive even with duties.
The steel ministry and steel companies such as JSW Steel Ltd (JSTL.NS) have opposed any duty reduction, saying it could lead to a shortage of iron ore for making steel.
Capacity utilisation at Indian steel mills hit an all-time low of 82 percent in the last fiscal year due to a shortage of iron ore, according to lobby group ASSOCHAM.
With exports in major producing states Goa and Karnataka still banned in a crackdown on illegal mining, volumes from India could remain well below the record high of more than 117 million tonnes seen in 2009-2010.
The Supreme Court is hearing an appeal to reopen mining in Goa, India's top iron ore exporter that shipped more than 43 million tonnes in 2011-12 before mining and exports were banned in September last year.
Though the top court has allowed the reopening of most mines in Karnataka, delay in getting various government clearances has meant that only a handful have restarted.
"We miners are grappling with so many issues," said FIMI's Poddar, whose four mines in Karnataka are still waiting to reopen.
(Editing by David Evans)