FM defends duty on iron ore

Amid the threat of a Chinese boycott of Indian iron ore due to the imposition of a Rs 300 per tonne duty on exports, finance minister P Chidambaram today staunchly defended the measure.

Amid the threat of a Chinese boycott of Indian iron ore due to the imposition of a Rs 300 per tonne duty on exports, finance minister P Chidambaram today staunchly defended the measure. Inaugurating the first full-fledged Bank of India branch here, he said that the move would “conserve” the country’s raw materials for the domestic steel industry. “There is no controversy. As I said in my Budget speech, it is intended to conserve raw materials for our own steel industry and at the same time, create some revenues taking note of the fact that prices are ruling very high.”

The new policy, announced by Chidambaram in his February 28 Budget speech, is regarded as the first major move by the government to conserve scarce national resources. But Chinese importers have decided to boycott Indian iron ore in protest against the Indian suppliers’ attempts to increase iron ore prices.

India announced the duty of Rs 300 ($6.78) per tonne of iron ore exported with effect from from March 1, and Chinese importers say that Indian exporters intend to transfer the increased costs to Chinese buyers, even for contracts signed but not executed before March. As the world’s biggest producer and consumer of steel, China imported a record 325 million tonnes (mt) of iron ore in 2006, of which 8.3 million tonnes came from India. India is currently the third-largest exporter of iron ore to China after Australia and Brazil, and China is the largest buyer of Indian iron ore.

Story continues below this ad

Chidambaram also explained the government’s stand on the controversy raging in India over the setting up of China-style special economic zones (SEZ). He clarified that the government recognises SEZs as “a useful tool” in furthering industrialisation but will implement the concept in its “own way”.

“We recognise that SEZs are a useful tool for industrial development, especially in areas where infrastructure is lacking. Where infrastructure already exist, it is perhaps not necessary to create SEZs.”

The fishing village of Shenzhen is the first SEZ in China. It was China’s first major experiment with capitalism after that country’s late leader Deng Xiaoping’s landmark visit to southern Guangdong province in 1986. “Where infrastructure is not existent, an SEZ will be an useful tool to attract investors to build the infrastructure,” Chidambaram said.