Plea to withdraw duty on export of Bauxite Ore
April 27, 2016

Plea to withdraw duty on export of Bauxite Ore

Plea to withdraw duty on export of Bauxite Ore

Bauxite exporters for long have been persistently demanding the removal of custom duty on export of the ore. Yet in the last budget custom duty on export of Bauxite Ore was marginally reduced from 20% to 15%.   This reduction in custom duty is inadequate, bauxite continues to attract  heavy custom duty and  as a consequence  the price of Indian bauxite  is  uncompetitive in the global market, further  resulting in a decline of nearly 11 % of  its exports  said Mr. Vijay Kalantri, President, All India Association of Industries (AIAI).

Mr. Kalantri commented that the average sale price of bauxite in the international market is in the range of USD 26 to 30 FOB. Whereas Indian bauxite is at USD 32 to 35 FOB due to the 15% export duty levied on the ore. Resulting in an adverse impact that small and medium sized enterprises engaged in mining, processing and exporting of bauxite face in the global market.

Mr. Kalantri is of the view that the authorities should relook into the issue as the bauxite, which is being exported is non-plant grade, low density bauxite i.e. bauxite which cannot be used in refractories and is mined from the west coast.

Also domestic aluminium producers refuse to source material from the west-coast even to tide over their rare and temporary raw material disruptions and so from a domestic point of view, this bauxite is waste-ore added Mr. Kalantri.

Mr. Kalantri further added that small mine owners and exporters have over the last 10 years taken the initiative to mine and export these inferior ores and have succeeded in developing a sustainable bauxite industry which generates direct and indirect employment in the mining sector of more than 50,000 laborers only in Gujarat & Maharashtra.

It is also important to note that being a mining industry  this is a labor driven sector and is responsible for  hundreds and thousands of labourers  employed within the sector either directly or indirectly. If exports are stopped, thousands of laborers will lose their jobs as the present situation threatens to destabilize small units of the sector resulting in loss of employment and job cuts said Mr. Kalantri.

Mr. Kalantri also commented that China is one of the world’s largest consumers of bauxite being resource poor it needs to import bauxite for its huge quantities of aluminium requirements.  Also Chinese refineries are programmed to use a variety of bauxite combinations regardless of its quality, energy potency or its consequence on the ecosystem.

China also imports bauxite from Malaysia, Australia and Guinea. Indian Bauxite comprises of only 14% of the Chinese bauxite import requirements as compared to other competing countries mainly on account of the steep export duty and low quality.

Besides these countries exporting bauxite levy 0% duty on the ore.  Australia has increased its Bauxite exports to China by 27% from 15.04 million tons in 2014 to 19.14 million tons in 2015 and Malaysia amazingly has increased its exports to China by 700% i.e. from 2.82 million tons in 2014 to 22.36 million tons in 2015.

Mr. Kalantri further stated that India has more than 3 billion tonnes of bauxite reserves, spread over several deposits, containing from a few thousand tonnes to more than 300 million tonnes. This figure could increase as the present day technology for alumina production can accept lower quality ore. However in India the possibility of utilizing the low grade deposits for various products is either not fully explored or the technology is not made available and as such low grade bauxite is not utilized.

At present there are only 2-3 major consumers of bauxite in India for producing Aluminum metal in India leaving abundant resources available untapped, which can lose its economic value due to its potency if not used over a period of years.

India fortunately boasts of more than 3.5 billion tons of Bauxite reserves, of which 2/3rd are of high quality, not amounting to exports and 1/3rd are of low grade and can be exported. There is still a lot of potential for discovering a larger bauxite resource base in India through modern and scientific prospecting methods. Furthermore, India currently produces less than 2 million tons of aluminium per annum; at India’s current rate of aluminium production and consumption, India’s known bauxite reserves will possibly last for more than 300 years.

Also with the slow down on the Chinese economy Global Trade has dropped to 2.8% from a projected forecast of 3.8% in FY – 2015-16 & 2016-17.

Mr. Kalantri mentioned that the Government should review the levy of  duty on export of Bauxite, as this will  be detrimental and as  such export would become unviable Also  huge quantities of such inferior grade Bauxite would pile up at the mines with no takers. Further this is also against the principles of mineral conservation and can be detrimental for the local environment as well.

Mr. Kalantri further informed that the AIAI has also represented this issue to Mrs. Nirmala Sitharaman, Minister of State for Commerce and Industry, Mr. Arun Jaitley, Minister of Finance and other concerned authorities for reconsideration.

Keeping the above in view, we request the Government of India to reconsider and withdraw export duty on export of bauxite.  If low grade bauxite is not exported, it will certainly cause problems for the bauxite industry. Since their leases are very small and will result in scarcity of space in their mines, and as such these mines will not be able to continue production for the calcinations, refractories abrasive industries. As a result not only these small mines face shutdowns but   will also be detrimental for the correlated industries of the sector said Mr. Kalantri.