The Commerce Ministry has asked the Finance Ministry to do away with the 8 per cent ad valorem export duty on low-grade iron ore saying that receding order books, rising inventories and possible production cuts could seriously jeopardise the prospects of the iron ore exporters.

The move comes after the iron ore exporters led by their apex body Federation of Indian Mineral Industries (FIMI) petitioned the PMO and Commerce Ministry recently highlighting their plight, pointing out that following the global meltdown and financial crunch, there has been a scaling down of economic activity globally. The production of steel in China has come down from 46.94 MT in June to 39.61 MT in September this year, a fall of about 16 per cent, FIMI said and cited reports that some big Chinese mills are proposing a 20-30 per cent cut in steel production. “Since 88 per cent of total Indian iron ore (fines) exports make their way to China, a slump in the Chinese steel industry will adversely affect exports. Ore exports in September 2008 were down by 44 per cent over September 2007 and in October 2008 by more than 54 per cent over the corresponding month last year,” FIMI said in its petitions to the PMO and the Commerce Ministry.

The Federation said there are already distress sales particularly by the traders who have got their material stocked at the ports. The movement of iron ore from areas in the eastern sector as well as Bellary-Hospet in Karnataka to ports has come down drastically. “This is having an adverse impact on the production of iron ore, since the fines have started gradually piling up at the mines because of a slowdown in exports. A large number of mines have closed down or scaled down production by reducing the number of shifts,” the FIMI said. “If these duties continue, we are sure, Australia and Brazil will displace India from the world iron ore trade,” it argued.