Banning iron ore export makes no economic sense, says FIMI

BANGALORE - The Federation of Indian Mineral Industries (FIMI) Tuesday ridiculed the Karnataka government for banning export of iron ore, as it is not used by Indian steel plants due to its low grade quality.

“Banning export of medium and low-grade iron ore makes no economic sense, as local steel plants do not use due to ferric content in them being less than 60 percent,” FIMI Director David Pichamuthu told IANS here.

In a bid to check rampant illegal mining in the rich iron ore belt of Bellary-Hospet in north Karnataka, the state government July 26 banned exports from 10 minor ports in the state and July 28 withheld permits to move the extracted raw material from the lease areas of lessees.

“Only China has been buying low-grade iron ore from India since 2005 in the run-up to the 2008 Beijing Olympics and subsequently to blend it with high-grade iron ore it imports from Brazil and Australia for hundreds of its steel plants,” FIMI Vice Chairman Basant Poddar said.

Though Chinese steel plants consume only 10 percent of Indian iron ore annually, they account for about 80 percent of 40 million tonnes of the raw material extracted by Indian mining firms.

“Of the 40 million tonnes of fines and lumps extracted, about 30 million tonnes are from Bellary-Hospet region. While high grade hematite ore with over 65 percent ferric content is used by domestic steel plants, the medium and low-grade fines and lumps are exported to China,” Poddar pointed out.

Noting that if the export ban was not lifted, the industry would suffer a loss of Rs.13,000 crore (Rs.130 billion/$2.8 billion) in sales at the rate of $100 per tonne for 30 million tonnes over the next 12 months.

“In addition, the central and state governments will suffer huge revenue losses in terms of railway freight (Rs.6,000 crore), export duty (Rs.500 crore), port handling charges (Rs.600 crore), forest tax (Rs.1,000 crore) and royalty (Rs.300 crore) per annum,” Poddar claimed.

Withholding permits to move iron ore for export from the mining sites will also lead to piling up tonnes of stocks causing environmental damage around, especially during the current monsoon season.

“As a result of the ban, taken by the state government in a huff and without consulting us creates uncertainty in the industry, which has invested heavily in building the support infrastructure such as private railway sidings and export oriented units,” FIMI Chairman Shantesh Gureddi lamented.