Indian Finance ministry against canalization of exports

Saturday, 31 Dec 2011

The Indian Express reported that the Indian finance ministry has shot down commerce ministry’s suggestion that canalizing of iron ore exports would be an effective mechanism against illegal exports.

The finance ministry is instead keen to impose fiscal measures as an appropriate tool to discourage unaccounted export of the domestically mined mineral.

The suggestion of senior commerce ministry officials for canalizing iron ores through Minerals and Metals Trading Corporation was ruled out by Mr DK Mittal secretary, Department of Financial Services at a recent meeting convened by Mr PK Misra steel secretary.

According to the minutes of the meeting, “Mr Mittal pointed out that canalization is not the right instrument for controlling ore exports in the long-run. Instead, the Secretary DFS argued that imposing fiscal measures were the most appropriate tools. Mr Mittal further reasoned that canalization could at best be a temporary measure.”

Mr Mittal’s assertions assume importance in the backdrop of the commerce ministry’s recent communiqué telling the Cabinet that instances of private exporters resorting to illegal export of the mineral have been reported, which amounted to circumventing the Foreign Trade Policy.

Demanding tighter regulation of ore exports, the commerce ministry has pitched for canalizing exports of most grades of the mineral including the ones originating from the Goa Redi region to enforce regulation and accountability in exports.

In the note, commerce and industry minister Anand Sharma argued that state governments of Karnataka and Orissa had to intervene to contain illegal mining within their boundaries. So canalizing all ore exports through a single nodal agency MMTC would help curb illegal mining and prevent circumvention of EXIM policy since a single agency as an interim measure would be entrusted with exports and documentation could be checked suitably.

The finance ministry is more concerned about the huge losses incurred to the exchequer due to unaccounted exports of the some grades of the minerals.

In the last Budget, finance minister Mr Pranab Mukherjee had imposed a 20% ad valorem duty on ore exports following a campaign by the steel ministry for disincentivising ore exports as a strategy to conserve the mineral to meet the growing demand of domestic steel makers.

(Sourced from www.indianexpress.com)