Mine exporters will have to pay Rs 156 per ton to start exports

PANJIM: From now on, every time each ton of ore is extracted and ready for export, the mining company or trader doing the export, will already lose Rs 100. So the very act of mining for export starts with a loss with no scope for profit. The bad news gets worse. These figures are for grade 58 of iron ore. In Goa with lower grades, loss margins go even higher. Therefore, for all this talk of a mining restart by Chief Minister Laxmikant Parsekar and others, is limited to starting mining activity related to production for domestic consumption. And in Goa, that is akin to almost nothing. 

The effective bottom line is this. Mining for exports with an export duty of 30% per ton, will not allow mining to restart in Goa. What is also alarming for the Goa mining industry is the distinct indication given by the Centre that the focus should be to meet domestic demands. A source in the Federation of Indian Mineral Industries (FIMI) said that this was conveyed to FIMI representatives by Union Mines Minister Narendra Singh Tomar on the sidelines of his meeting with FIMI on April 1.

What has been completely missed out, or deliberately overlooked by the ruling BJP and the Directorate of Mines and Geology is the math that goes into the export of each ton of ore. And the sum total is startling.

The current international price (as per the latest Platts Index) is 40 dollars per ton. Then come the deductions which include 30% export  duty, 15% royalty, 10% to the Goa mining fund, 15 % to the district development fund (equivalent to royalty) 2 % to the exploration fund making a dent of a little more than 70%. So what remains is 30% which works out to 12 dollars per ton or Rs 744 (at an exchange rate of Rs 62 to a dollar).

There are further reductions. Of the remaining Rs 744 to a dollar the following amounts are further lost by the exporter– Rs 300 on barge freight and a further Rs 250 a ton on transportation from mine to jetty– leaving the exporter Rs 194 per ton. 

But it doesn’t stop here. For the ore to be drawn out from the ground there is an extraction cost of Rs 70 per ton, and to get that one ton of usable ore five tons have to be extracted, taking the extraction cost to Rs 350.

Therefore what is left with the exporter is a negative balance of Rs 156 per ton (Rs 194 less Rs 350. The exporter loses Rs 156 for every ton of ore he exports. The industry sees this as a no win situation. Shivanand Salgaocar who heads the association of mineral exporters of Goa, told Herald “With an export duty of 30% nobody gains. Ore will continue to lie in jetties. And these figures are only for 58 degree ore with most of it of a lesser variety. Only if the duty is reduced to 5% does any exporter have a chance to even attempt to get back into business.”

Haresh Melwani of  H L Nathrumal and Company and member of IFMI says “It is simply not possible to restart mining for exports. It’s a no win situation unless export duty is abolished or drastically reduced. We cannot start mining”

The President of Mormugao Stevedore’s Association Vinod Pakkot said “All obstacles in the path of mining resumptions were cleared with the reinstatement of environmental clearances by the MOEF, but export duty still continues to haunt the miners, the only way to incentives and revival of  the industry is to encourage exports by abolishing the export duty on iron ore,” he said in a statement.