In a recent Central government decision to hike the export duty on iron ore lumps and iron ore fines by 5 percentage points - from the present 5 percent to 10 percent; and from nil to 5 percent respectively - evidently spells serious repercussions for the mining sector.

As per official sources, the Finance Ministry has overlooked the Steel Ministry’s proposal of having standardized 15 percent export duty on all iron ores - lumps as well as fines – and has stuck with the five percentage point duty differential between lumps and fines.

Sources also revealed that though the government intends discouraging exports of lumps, it is not opposed to increased exports of fines.

During the April-October 2009 period, India’s iron ore exports witnessed a 21 percent growth – up from 44.06 million tonnes in the same period in 2008 to 53.23 million tonnes. In addition, the spot prices of iron ore in China also increased because of an increased off take of Indian ore by Chinese steel mills; thereby bringing in higher export realization for Indian iron ore exporters.

However, while the Finance Ministry claims that the announced export duty hike will help the Central government generate more revenues, R K Sharma, Secretary General of the Federation of Indian Minerals Industries (FIMI), condemned the move, saying: “This decision has come at a wrong time when the exports were picking up and showing signs of recovery.”