Indian mines ministry against iron ore export duty hike

Sunday, 15 Jan 2012

PTI reported that mines ministry has expressed reservation over Finance Ministry's decision to increase export duty on the low grade iron ore in the country.

Mr AK Srivastava additional secretary ministry of mines on the sidelines a conference told reporters that "The Mines Ministry is not favourably inclined towards increase in the export duty.” He said the ministry has already written to the government about their views, which might be considered during Budget.

Mr Srivastava said that "There is always a budget. The final call on the hike would be taken during budget adding that there is always a possibility that central government might revisit it during the presentation of Budget.”

Mr Srivastava said at least low grade ores, which are not consumed by the steel industry, should be spared from the hike. He added that "If export duty is increased on high grade, the low grade ore should be allowed to continue with the earlier duty.”

The mines industry in Goa had expressed their concern over increased hike, which according to them, would spell doom on their already troubled trade.

The export duty was hiked from 20% to 30% from December 30, 2010 onwards by the Finance Ministry in order to channelise the Iron ore to Indian steel industries.

(Sourced from PTI)

Goa miner want exclusion from export tax

Friday, 06 Jan 2012

Times of India reported that miner as well as the Goa Chamber of Commerce and Industry have taken strong objection to the iron ore export duty hike to 30% from 20% effective from December 30.

As per report, both Goa Mineral Ore Exporter's Association Goa Chamber of Commerce and Industry have written to the finance ministry Mr Pranab Mukherjee to roll back the hike for low grade ore from Goa.

Mr Manguirish Pai Raikar president wrote that "Though the ministry has not given any rationale behind the hike, we believe it is prompted by the major domestic steel producers and is intended to make export of iron ore less competitive so that ore can be made available for encouraging domestic production of steel. A hike on ore with Fe content over 58% may be justified as such ore is used by the domestic steel and sponge iron industries.”

Mr Raikar in the letter, forwarded as a press note, elaborated that domestic steel manufacturers use iron ore lumps, while Goa produces low grade ore consisting mostly of fines. The latter ore, including fines, cannot be pelletised and hence are not suitable for steel making.

Mr Raikar added that "At the moment, only China has the technology to enable use of these materials which are unwanted in India; and until such time as the technology comes to India, this export should really be incentivized and not taxed.”

He held that if Goan ore is not exported and thus converted to foreign exchange after undergoing the process of generating employment and tax revenues, and is not consumed in India, it ceases to become a strategic natural resource and loses all economic relevance. Mr Raikar stated that "The low grade ore generated in the course of mining will then have to be treated as waste, raising environmental concerns in a tourist paradise.”

He further held that the low grade ore which competes for the Chinese market against ores from Australia, Madagscar, etc and is sold in the spot market may see clients opt for other players as Goa's pricing may be higher. This is especially since this is the second major export duty hike in this fiscal. Mr Raikar further stated that "This will make it difficult for us to negotiate long term sale arrangements so that mining investments, which are all long term in nature, cannot be planned properly.”

Mr Raikar concluded by pointing out that in the absence of any alternative use for low grade Goan ore, ore from Goa and Redi (southern Maharashtra) were treated separately in the export policy during earlier years and Goa should continue to be treated so.

Mr Glean Kalavampara secretary of GMOEA pointed out that no low grade ore is used by the domestic steel industry and even existing pig iron plants in Goa draw iron ore from Karnataka and elsewhere. He told TOI that "Logistically speaking, it is not practical or cost effective to transport ore from Goa to Orissa and other states where steel plants exist as there already exists surplus ore in those states.”

GMOEA too fears that Goa will lose out to Australia and Brazil who could easily increase their ore outputs and wipe Goa out.

(Sourced from TOI)

Steps taken by Indian government to curb iron ore exports

Tuesday, 16 Aug 2011

India's iron ore exports, which fell for the first time in a decade last year, could halve over the next five years as the country feeds the expansion of its steel industry.

Following is a timeline of key developments in India's iron ore sector since Karnataka, the country's second-largest producer, introduced its shipments ban:

July 26th 2010
Karnataka, ruled by the opposition Bharatiya Janata Party, bans shipments of iron ore. The state government had faced pressure from the ruling Congress led central government to clamp down on illegal mining. Exporters in the state subsequently challenged the ban.

September
Iron ore exports post their sharpest monthly fall in nearly two years after Karnataka's ban and slow China demand. Exports drop 47% from a year earlier to 3.03 million tonnes.

November 19
Karnataka's high court upholds the ban on exports.

November 23
Iron ore miners in the state say they will challenge the ban in the Supreme Court.

January 11th 2011
Top iron ore producing Orissa says it is considering seeking a ban on exports of the key raw material.

January 20
The Supreme Court delays its decision on the ban to mid February.

January 25
Indian railways announce an increase in freight costs on iron ore for export by 50% to INR 1,500 per tonne.

January 29
India's Multi Commodity Exchange and Indian Commodity Exchange launch the world's first iron ore futures contracts. But a ban on foreign players means liquidity is low.

February 10
Steel Authority of India wins environmental approval for its own iron ore mines in Jharkhand. SAIL says it will be operating in three years and will be key to its future iron ore supply.

February 11
The Supreme Court again adjourns its hearing on the Karnataka ban, this time to April 4.

February 18
Chhattisgarh joins Orissa in seeking central government approval to ban iron ore exports.

February 28
India hikes export duty on iron ore to 20% from 5% for fines and from 15 percent for lumps in its annual budget.

March 3
Freight rates are hiked again, this time by 100 rupees per tonne to INR 1,600.

March 30
Indian Railways says it will impose a "busy season" charge of 7 percent on iron ore freight rates from April 1 to June 30 and from Oct. 1 to March 31. The charge will equate to about INR 150 to INR 200 per tonne, one trader says.

April 5
Supreme Court orders Karnataka state to lift ban on iron ore shipments from April 20.

June 27
Iron ore exporter Mineral Enterprises Ltd says to call on Supreme Court to uphold lifting of the Karnataka ban which has been delayed by an inquiry into illegal mining.

July 27
An independent led inquiry implicates BS Yediyurappa chief minister of Karnataka, in a USD 3.6 billion illegal iron ore mining scandal.

July 29
Supreme Court imposes an interim ban on mining in the district of Bellary, a key iron-ore rich region in Karnataka, on concerns of environment degradation.

July 31
Yediyurappa resigns as Karnataka chief minister.

August 5
Supreme Court partially lifts iron ore mining ban in Bellary district, allowing state run NMDC to mine up to 1 million tonnes a month from Aug. 6.

(Sourced from Reuters)

Indian steel industry plans mega investment on iron ore pelletization

Wednesday, 13 Jul 2011 |BS

BS reported that to address the several restrictions on iron ore exports, many mining and steel companies have decided to invest in the processing of low grade iron ore into pellets, the processed raw material used for making steel.

With the restrictions, steel and mining majors such as JSW Steel, Essar Steel, Ispat Industries and NMDC have decided to invest in making pellets to feel steel plants. Their combined plans total INR 8,000 crore in the next four years, to establish pelletisation capacity of 40 million tonnes a year.

Mr Haresh Melwani CEO of H L Nathurmal & Co a Goa based iron ore miner and exporter said that “The industry requires INR 20,000 crore to process the entire amount of exportable fines, which looks impossible at this point in time unless steel mills take an aggressive initiative.”

Mr RK Sharma secretary general of FIMI said that “The government is inviting a big risk by forcing iron ore miners to set up pelletisation plants to convert iron ore fines into pellets. Despite incurring a cost on conversion, miners are unlikely to get adequate remuneration, as pellets need to compete with high grade iron ore. Steel mills may prefer to use lumps instead of pellets at a premium.”

The Indian government has already levied 10% ad velorem royalty on iron ore mining and this is likely to be doubled. Also, the proposed changes in mining rules call for an amount equal to the royalty to be paid for the welfare of project affected people. The government has also levied a 20% export duty.

Australian miners to benefit from iron ore export duty by India

Monday, 14 Mar 2011

The Australian reported that Australian miners Rio Tinto and BHP Billiton look set to profit from India's attempt to keep its iron ore at home after Indian government announced it would quadruple export duties on the raw material.

Analysts said that India's move is expected to keep iron ore prices near record levels, with the latest quarterly pricing contracts struck at about USD 180 per tonne.

China absorbs much of the iron ore sent from India, the world's third largest exporter of the crucial steel ingredient behind Australia and Brazil, and any increase in duties will likely be passed on by its producers to the Chinese consumer, forcing up the global price.

One market insider said that "The immediate impact is potentially positive in the sense that India is the marginal cost producer in the market and when supply is as tight as it is at the moment, then these export duties get passed on, which gets added on to the global spot price. Assuming China can continue to pay, the price will go up and everyone who sells into the seaborne market will benefit."

Mr Zhu Xi'an, Beijing based analyst at Mysteel.com, said the new restrictions would help support the high price of iron ore as Indian export volumes dropped, following state restrictions introduced last year in several mineral rich Indian provinces. He added that "The proportion of Indian ore coming into China has dropped from 25% in 2005 to 15.6% in 2010. The restrictions and increase of tax will benefit other ore suppliers, including Australian mines."

But the move could also be a mixed blessing for smaller Australian miners operating within the Indian market, such as Perth based NSL, which bought up two small iron ore interests in India in 2009 to feed China's insatiable demand. (Theaustralian)

FIMI wants roll back of export duty hike on iron ore

Tue,8 Mar, 2011, 02.52PM IST,PTI

NEW DELHI: Hitting out at the Finance Minister for increasing export duty on iron ore, the Federation of Indian Mineral Industries has written to Pranab Mukherjee requesting a roll back to the pre-Budget level.

"We would be grateful if you consider sympathetically rolling back the increase in export duty to pre-Budget 2011-12 level," FIMI Secretary General R K Sharma wrote in a letter to the Finance Minister.

The government has quadrupled export duty on fines to 20 per cent in the Budget for 2011-12. India had shipped over 100 million tonnes iron ore in 2009-10 and 70-80 per cent of that was in the form of fines. For lumps, the duty has been raised to 20 per cent from 15 per cent earlier.

"The hike in export duty will keep the domestic iron ore industry in a suspended animation in which illegal miners would reap benefits," Sharma said, adding that such increases keep iron ore industry on tenterhooks and do not allow it to generate surplus to invest in exploration.

Indian steel makers mostly use lumps and the requirement of fines does not exceed 30 million tonnes a year as two major firms, SAIL and Tata Steel , use fines produced from captive mines. The plants, which do not have own mines, procure fines from non-captive standalone mines, including NMDC.

"To supply lumps to the domestic industry, fines have to be evacuated from mines. Since domestic demand is inadequate, only outlet is export. In the absence of an attractive export market, a large portion of iron ore produced will be wasted," Sharma wrote.

Total iron ore demand by the Indian steel companies is about 102 million tonnes against the domestic production in 2009-10, including stock-pile at the mine-heads, of 299 million tonnes.

The Railways has also raised freight on iron ore meant for exports by Rs 100 a tonne to Rs 1,600 a tonne with effect from March 1.

"The increase in export duty and railway freight have affected the iron ore industry very adversely," Sharma wrote.

Iron Ore miners up in arms against export duty hike

Mon, March 7, 2011
By Hrithik Kiran Bagade, DHNS

Bangalore : Dealt with a double whammy in the form of ad valorem export duty hike on both their most staple revenue resource — fines and lumps, the country’s iron ore sector is up in arms over the Centre’s move.

Driving the final nail in the coffin of the iron ore industry was also the railway budget which increased freight charges by Rs 100 a tonne, hoping to take advantage of the bullish domestic iron ore market.

While Finance Minister Pranab Mukherjee’s logic in hiking the export duty from five per cent for iron ore fines and 15 per cent for lumps to a uniform 20 per cent on both — can be seen as an effort to soften the rising steel prices in the domestic market by discouraging exports of iron ore, the ore exporters do not agree with the logic.

According to the iron ore exporters, besides badly impinging on the export of iron ore, the Centre’s move would also sound the death-knell of the sector which is already caught in the illegal iron ore mining controversy, leading to its ban in Karnataka, one of the leading iron ore mining states.

Since the mining industry is labour intensive, creating obstacles to exports may lead to huge layoffs. An official of a major iron ore mining company, MSPL, argued that instead of hiking the export duty, the Centre and the State must take steps to curb illegal mining in order to uplift the sector which is already in the doldrums due to the illegal mining controversy.

The steel sector, which has been asking for such a measure for many years, is naturally happy as more ore will be available within the country. Justifying the sector’s demand, which the Centre, in turn, acceded to, an offical from Tata Steel put it: “It is our belief that iron ore as a natural resource is important for the steel industry. It is imperative that value addition of the ore is done within the country for higher realisation.”

However, Federation of Indian Mining Industry Secretary General R K Sharma refused to buy this argument. According to Sharma, the hike, coupled with increase in railway freight will not only make Indian iron ore uncompetitive in the global market it would also affect the export of fines. Furthermore, while reasoning that fines do not enjoy strong domestic demand, he argued that export duty hike would only result in huge stock building without adeqeuate storage facilities. He also added that hike in the duty on lumps will only result in slowdown in total ore mining because fine and lumps are mined together. This in turn may lead to higher price of steel and harm domestic consumers.

Emboldened by the budget’s favourable move, the Tata offical further argued that when iron ore is exported as a finished product with greater value addition, the net realisation is higher, quipping: “Why export the raw material, when the country is capable of producing and exporting the finished product?”

Mukherjee in his budget has also lowered export duty on iron ore pellets to zero to encourage higher value addition in exports. But ore miners say that the demand for pellets from China, the main importer of Indian fine ore, is low because the country has created a huge capacity for making pellets and it imports mostly fines. India, world’s third largest iron ore producer, sells most of its annual exports of 100 million tonne to China. Iron ore exports in April 2010-January 2011 stood at 75.11 million tonne, which was down by 18 per cent from 91.71 million tonne a year ago, according to Fimi data.

Iron ore duty hike may not impact domestic prices: NMDC

Mar03, 2011

Hyderabad: India's largest iron ore mining company NMDC today said the hike in export duty on iron ore to 20% may not impact the domestic price situation.

"I don't think so (of any domestic price impact). Because, the international price is already very high. And in normal economic trend, whenever there is duty hike the domestic prices will go down. But iron ore is such a commodity... Good quality of iron ore is scarce in our country so the price may go up also. Lets see," NMDC Chairman Rana Som told reporters on the sidelines of a seminar-"Millennium Development Goals, performance, prospectus and challenges for South India" at Institute of Public Enterprises here.

Union Finance Minister Pranab Mukherjee in the Budget for 2011-12 had fixed a uniform export duty of 20% on all types of iron ore, which is a vital steel-making raw material.

Replying to a question on possible export price revision in the wake of duty hike, he said they will have to consider the impact on domestic price before taking a decision.

"That is some thing we will have to discuss. We have no idea at this moment. We are watching the situation. Whenever such types of duties are there will be two type of impacts. One, it impacts the materialisation of import. The second and the most important impact is how the duty will be impacting the domestic price situation. So we will have to take into account both the situations," Rana Som said.

He said the duty hike may generate Rs 10,000 crore additional revenue to the government.

Meanwhile, NMDC signed a contract agreement with a consortium comprising SVAI, Austria, SVAI India, and NCC for turnkey execution of a 460 mxm sinterplant complex at 3 million tonne integrated steel plant at Nagarnar.

The schedule of the project is 33 months from the effective date of contract.

(sourced:Press Trust of India)

Indian iron ore exports to come down by up to 35pct - FIMI

Thursday, 03 Mar 2011, Press Trust of India

Miners' body the Federation of Indian Mineral Industries said as a fallout of the duty hike on iron ore exports in the Budget, India's outbound shipment of the key steel making raw material will come down by up to 35%.

Mr Siddharth Rungta president of FIMI told PTI that "Our logistics costs are already high. The rise in export duty will make it more uncompetitive. I sense iron ore exports from the country will dip by 30% to 35% on an annual basis as a result."

Mr Rungta said that the organization would request the government to reconsider its Budgetary proposal by highlighting possible fallouts of the duty hike move soon.

He said that "Because of the hike in export duty, no fresh contracts are signed now. Only earlier contracts are being honored. Though the impact of export duty hike is not being immediately felt, it will be felt within a month."

Mr Rungta said that the hike in export duty would also lead to lower domestic production of the raw material resulting to an increase in price. Though the cost of mining iron ore in India is more or less the same when compared with others in the global arena, handling and transportation cost here is far higher than other global producers.

While the finance minister Mr Pranab Mukherjee justified the move to increase export duty on the pretext of ensuring raw material security, FIMI maintain there would be no dearth of iron ore in the country for at least next 200 years as India has sufficient reserves to feed the domestic plants.

Budget update - Indian miners cry foul over iron ore export tax hike

Tuesday, 01 Mar 2011, PTI

Indian finance minister Mr Pranab Mukherjee’s move did not gel well with the Federation of Indian Mineral Industries, which saw steel cartel of few majors behind the hatching of the move and termed it as a huge blow for domestic iron ore producers.

Mr RK Sharma general secretary of FIMI, while observing that the entire proposal was self defeating, warned that production will come down as a result of which steel prices will go up making end users suffer.

He said “The entire proposal is self defeating. It too means a huge loss to the exchequer, he said adding the future of 1 million people directly employed with the mining industry is also at stake.”

Tags : raw material, steel mills, Steelmakers,

Budget update - TATA Steel reaction on the Union Budget FY 12

Tuesday, 01 Mar 2011

TATA Steel said that “I rate Union Budget FY 12 as a balanced budget and a budget that is non-disruptive. FM is continuing with the policies of the Government since it came to power keeping the focus on growth and inclusiveness. The Government continues its endeavor to maintain robust economic growth and steady fiscal consolidation by focusing on economic inclusion, liberalizing FDI policy, boosting investment in infrastructure, agriculture and the social sector and simplification of procedures. The budget has to be seen in the context of the measures already announced and I am sure there will be several other measures that Government will announce progressively, to ensure that the economy exceeds the 9% GDP level at the earliest.”

“The Government's target GDP growth rate of 9% and commitment to bring down fiscal deficit to 4.6% of GDP for FY 2011-12 and 3.5% of GDP by FY 2014 are statements that hold a lot of promise. There has been a positive change in the quantum of fiscal deficit for FY 2010-11 which was at 5.1% of GDP against the previous budget estimate of 5.5%. The FM affirmed his resolve to introduce DTC from 1st April 2012. However as regards GST, the rollout including constitutional amendment is still in progress.”

“The increase in MAT rate, when it is felt that it is already high, would not have a beneficial effect on the industry, although this would be marginally offset by the reduction in surcharge. The imposition of MAT on SEZ developers will have an adverse effect on SEZs.”

“On personal taxes front, while the exemption limit has been increased to INR 180,000, there was need for greater increase keeping in mind the stubborn inflation over the past year and other factors. The liberalization of existing scheme of interest subvention of 1% on housing loan and enhancing housing loan limit to INR 2.5 million for dwelling units under priority sector lending are positives.”

“The focus on infrastructure sector is in keeping with India's insatiable need for enhanced infrastructure. India suffers from severe infrastructure deficit and any steps that are taken towards improving infrastructure are welcome. An increase of 23.3% over last year for infrastructure allocation, policy for development of PPP projects, increasing FII limits for investments in corporate bonds by USD 20 billion to USD 40 billion, and proposed issue of Tax free bonds of INR 30,000 crore will help in the process of capital formation and infrastructure development necessary to sustain the economic growth of the country. Industries like steel, that have high capital outlays and also have high contribution towards creating infrastructure, should have been categorized as infrastructure industry too.”

“While steps have been taken for the food sector in the form of steps announced for Food Security Bill, Mega Food Parks, Agriculture Produce Marketing Act, storage capacity and cold chains, allocations to various schemes, etc., the budget could have offered more on the short term measures to contain food inflation.”

“The continuation of the disinvestment policy with a target of INR 40,000 crores in FY 12 is a welcome measure.”

“I also believe that there was an opportunity to develop Mumbai as an international financial center in view of the decline of traditional financial centers in the West and elsewhere, but the measures expected to be announced in this regard fall short of what could have been done to capitalize on this opportunity. The various legislations proposed in 2011-12 and discussions to liberalize FDI policy are a positive. Foreign investment in mutual funds would enable greater inflows and greater participation in the Indian capital markets but at the same time, this would also require careful monitoring. Funds provided for capitalization of Public Sector Banks, Regional Rural Banks and NABARD are also strong positive measures to ensure financial robustness of these banks and encourage financial inclusion, though the banks are likely to require greater capitalization to cope with increasing growth.”

“The green orientation of the budget in the form of national mission for hybrid and electric vehicles, allocations for Green India Mission, Environmental Remediation Programs show the commitment of Government to addressing environmental challenges facing the country. The greater allocations for social sector (by 17%) and education (by 24%) are also welcome positives but delivery and execution in these areas are crucial, especially keeping in mind the recent governance failures.”

“The increase in export duty on iron ore exports (lumps and fines) to a uniform rate of 20% with the intention of encouraging value addition within the country is a step in the right direction but the exemption of duty on pellets also reduces the scope for greater value addition within the country. The value addition at the pelletization stage is much less compared to finished steel stage and the aim should be to encourage steel production within the country, which would lead to more jobs, output and value addition within the country. It has been a persistent demand of the steel industry to include steel plants as infrastructure industry and it is hoped that steel plants would be included in infrastructure as capital investment in fertilizer production has been included in this budget. FM may still consider this request of the steel industry.”

Australia iron ore miners to gain if India exports slow

Tue Mar 1, 2011 7:29am GMT

SYDNEY, March 1 (Reuters) - Rio Tinto , BHP Billiton and other Australian iron ore producers could be in for a windfall of higher prices in the third quarter after India moved to hike export duties on iron to 20 percent, sector executives and analysts said on Tuesday.

The gains would come at the expense of steel mills worldwide, which are facing higher costs for an indispensable raw material at a time when costs appeared to be trending down.

"This will inevitably lead to higher spot prices, which when indexed later in the year will be the basis for higher contract prices," said an executive with a Australian iron ore company who did not want to be named.

India, the world's third largest iron ore exporter after Australia and Brazil, wants to conserve supply for domestic steelmakers, who play a vital role in building growing infrastructure.

Almost all of India's annual 100 million tonnes of iron ore exports head to China and the duty increase announced on Monday will make exports uncompetitive.

India plans to raise the duty to 20 percent from 5 percent on fines and to 20 percent from 15 percent on lumps. Fines are dust form ore with a lower iron content than lumps.

The Australian government on Tuesday upped its forecast for Australian iron ore exports this year to 425 million tonnes, more than any other country, predicting China would continue to be the main driver in seaborne consumption.

Analysts said they may need to rethink revenue forecasts for iron ore producers if the hikes have an impact.

"The general view has been that market conditions were stimulating a supply side response and when the supply starts to lift, price would come down," said UBS commodities analyst Tom Price.

SIGNIFICANT IMPLICATIONS

For four decades, miners and mills had agreed on a single annual price. But last year, Rio Tinto and BHP Billiton, the world's No. 2 and No. 3 producers, led a shift to quarterly pricing, based on the lightly traded but transparent spot market. Each quarter's base price is now linked to the average price of the preceding quarter.

The shift was immediately adopted by other Australian producers, including Fortescue Metals Group , Atlas Iron and Mount Gibson Iron .

Fortescue Executive Director Russell Scrimshaw recently said his company was "selling every tonne of iron ore it could produce".

India's greater focus on domestic demand comes as it grapples with concerns similar to China's: trying to hold down inflation while battling to meet demand for cars, homes and other steel-related goods from populations of more than 1 billion. Indian steelmakers have projected capacity at 90 million to 100 million tonnes by 2012, an increase of at least 50 percent from 60 million tonnes now, which will boost their ore demand to about 150 million tonnes, or 67 percent, from 90 million tonnes.

"You can see how a pickup in the spot market, which in the past meant little or nothing to BHP and Rio, now has very significant implications," said Trent Allen of Resource Capital Research. "And this move by India will push up the spot price."

Spot iron ore prices have so far barely budged, with Chinese mills wary of buying more ore when steel prices are coming down and there is still a huge stockpile of iron ore at Chinese ports which are usually cheaper to buy.

Indian ore with 63.5 percent iron content was quoted at around $188 a tonne, including freight, in China on Tuesday, said Chinese consultancy Mysteel, but traders say prices could rise $10-$15 in the near term with India's move.

"I think the increase in iron ore tax would have an impact on prices but it will take at least a couple of days for that to sink in," said a Shanghai-based iron ore trader who sells Indian cargoes to China. (Reporting by James Regan,sourced:Reuters)

Tags:India's iron ore sector, trends,steel industry, analysis, impact of the duty hike, Australia sees commodities boom rolling on, Indian steelmakers, Spot iron ore prices,

India hikes iron ore export duty to 20 pct

Mon Feb 28, 2011 8:47am GMT By Thomson Reuters

* Industry body says exports will be uncompetitive
* Shares in producer Sesa Goa slide

MUMBAI Feb 28 (Reuters) - India hiked export duty on iron ore to 20 percent from 5 percent for fines and from 15 percent for lumps in its budget on Monday in a move to curb exports and likely to push red-hot global prices higher.

India, the world's third-biggest iron ore exporter, wants to conserve the natural resource for domestic consumption.

"This will make the exports of (Indian) iron ore uncompetitive in the global market," said R.K. Sharma, secretary general of the Federation of Indian Mineral Industries (FIMI).

Steel Minister Beni Prasad Verma called for curbs on exports of iron ore on Friday and Karnataka, the country's second-biggest producing state, has a ban on shipments which is currently being contested by exporters in the Supreme Court.

India's iron ore exports have already slumped on the ban by Karnataka, with sales down 24.8 percent in December to 9.7 million tonnes from a year ago.

Exports during the April-December period fell 17.02 percent from a year earlier to 64.4 million tonnes. The country usually exports around 100 million tonnes per year.

Two other states, leading producer Orissa and Chhattisgarh, which accounts for 5 percent of India's annual shipments, have asked the federal government to allow them to ban exports.

The hike in export duty in the budget for the year to March 31, 2012 was widely expected as the country tries to underpin its rapidly-growing economy with investment in infrastructure.

The government would prefer states to focus on better regulation of the sector and incentives for increased domestic use of the resource -- moves which target better illegal production instead of export bans which hurt all producers.

FIMI's Sharma said the export duty would deter buyers.

"This measure could be counter-productive, and would make overseas importers shy away from buying from here," he said.

Shares in iron ore miner Sesa Goa extended losses on the duty imposition to hit a 52-week low.

India hiked freight rates for iron ore exports by 50 percent to 1,500 rupees per tonne on Jan. 27 but kept it unchanged in Friday's Railway Budget.

Spot iron ore prices extended losses on Monday after slumping 5 percent from mid-February last week, with Chinese steelmakers expecting prices to fall further on demand uncertainties.
(Reporting by Siddesh Mayenkar; Editing by Jo Winterbottom)