FM Proposes 10% Export Duty on Bauxite in India

 
The FM's proposal to impose a 10% export duty on bauxite on an ad valorem basis is likely to discourage exports of an important raw material for aluminium industry. It will thus benefit the domestic aluminium sector, led by state-owned National Aluminium CompanyBSE -2.32 % (Nalco) and private sector players like Hindalco industriesBSE -3.03 % and Balco.

In particular, it will help Vedanta Aluminium, which is facing a tough time getting bauxite to operate its refinery in Odisha's Lanjigarh.

Bauxite, a key raw material for aluminium, is mined and subsequently processed through smelting to produce alumina, which is refined to produce the metal. India has reserves of good quality bauxite, estimated at 5th largest in the world, which gives our aluminum industry a major cost advantage in terms of a secure raw material base.

Exports of bauxite have been duty free till now. The move is likely to curb exports and boost domestic supplies. The latest decision will also bring additional revenues to the government. "The measure is aimed at scaling down exports. This will help conserve bauxite reserves for Indian aluminium companies," said Prashant Khatore, partner, tax (Infrastrucre, Industry & Consumer) at Ernst & Young.

So far as policy is concerned, the budget proposal brings the aluminium sector at par with steel industry, where the government has in place stiff export duty of 30% on iron ore, a basic raw material. The domestic steel industry has been clamouring for export duty to conserve our reserves of iron ore. Alongwith, the mining crisis in Karnataka, Odisha and Goa, the step is estimated to have induced a sharp 60-70% fall in iron ore exports this year.