India's potential tax cut on iron ore exports could double its shipments of the steelmaking ingredient in the current year compared with industry estimates.
An export tax cut would mark a shift in India's policy towards iron ore, a raw material it has so much of but has opted to conserve for its domestic steel industry.
India is likely to drop the duty on iron ore exports to 20 percent from 30 percent, government officials said, as Asia's third-largest economy exhausts ways to boost foreign currency inflows and arrest a steep fall in the rupee, which is hammered to new lows nearly everyday.
If that goes ahead, India's annual iron ore exports may rise to almost 20 million tonnes, even if mining remains banned in Goa and parts of Karnataka, said H.C. Daga, president of the Federation of Indian Mineral Industries.
Without the tax cut, India's exports are only forecast at less than 10 million tonne for the year ending next March, said Daga.
With exports in major producing states Goa and Karnataka still banned amid a crackdown on illegal mining, volumes from India, previously the world's No. 3 shipper of iron ore, could remain well below the record high of more than 117 million tonne seen in 2009-2010, limiting the impact on the global supply chain and on prices.
"Certainly volumes will rise. If the impediments to exports are softened or are done away with, then definitely it will improve the competitiveness of India's exports," said Daga.
"Once an international buyer gets an indication that the worst is over in terms of policy, more orders will happen."
Also Read: Govt sets up Tax Administration Reform Commission
India exported 18 million tonne of iron ore in the year ended March 2013, down about 70 percent from a year ago. The massive drop followed a mining and export ban in Goa, the country's top iron ore exporting state, in September last year.
In Karnataka, the third-biggest exporting state, shipments had been banned since July 2010 and mining, which was banned by the Supreme Court in 2011, has only resumed in 13 of a total 115 mines.
The decline in India's exports allowed top suppliers Australia and Brazil and smaller producers from South Africa and Iran to sell more to China, the biggest market.
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