The government may put further checks on export of iron ore to allow greater availability of this critical input for the domestic steel industry at competitive prices.
In the wake of a pick up in global steel demand, and Indian iron ore getting exported to countries such as China, the domestic ore prices have also shot up, almost doubling to over Rs 4,000 per tonne from levels of Rs 2,000 per tonne between June to December, 2020.
Sources said that a proposal to increase export duty on iron ore is being actively considered by the finance ministry that may consider announcing the changed levy in Budget 2021-22.
A 30 per cent export duty is levied currently on iron ore having Fe (iron) content above 58 per cent. Sources said this may be increased 5-10 per cent or more to prevent its export to markets that are willing to pay more to hoard the ore for future use and maximise their gains.
Though the proposal is to increase the levy, sources said the government may also look to bring all categories of ore under the export duty structure as was available earlier.
A higher levy is expected to prevent the export of iron ore, tame prices and improve availability of this raw material to the domestic steel industry that can supply the material at competitive prices for the growing requirement from the infrastructure sector.
Along with a surge in ore pricing, steel prices have also increased by almost 50 per cent in the last few months. Bench mark Hot-rolled coil prices have increased by 46 per cent to Rs 52,000 per tonne in November as compared to Rs 37,400 per tonne in July this year. Rebar TMT, which is used in the housing and construction sectors, had touched Rs 50,000 a tonne.
With demand for steel picking up as infrastructure activity picks up pace in the country, higher prices have become a big deterrent to investments.