November 21, 2008

PMO deferred iron ore export duty proposal in Budget - Report

BL reported that union steel ministry’s proposal of imposing export duty on iron ore on an ad valorem basis in place of the current specific rate of customs duty did not go too well with the Prime Minister’s Office due to stiff resistance from commerce ministry, although it was accepted by union finance ministry.

The report cite a senior government official as saying that the issue was taken up at a pre budget cabinet meeting a couple of days before the Budget was to be tabled in Parliament and since there was no consensus on the matter especially from the commerce and mines ministries, it had to be removed.

The official said that “The finance ministry was keen that the export duty on iron ore be imposed at 15% ad valorem. But since there was no consensus on the issue, Prime Minister intervened and asked the proposal to be removed from the Budget till a consensus was reached.”

Even, Mr P Chidambaram union finance minister, in his post budget press conference admitted that since there was no consent from commerce and mines ministries on the matter, the export duty on iron ore was not tinkered with and the government decided to continue with the specific rate of duty that was imposed in 2007.

According to officials in the steel ministry, since the imposition of an export duty of INR 300 per tonne during the current fiscal, the spot prices of iron ore had undergone a significant change. The ministry also felt that since there have been cases where in higher grades of iron ore was blended with lower grades to pay a lower export duty of INR 50 per tonne, an ad valorem duty instead of the current specific rate of customs duty was the best way to address the issue.