News

NEW DELHI (Reuters) - An export duty of 300 rupees per metric tonne on iron ore announced in India's budget is effective immediately, even though the financial year does not start until April, a finance ministry official said on Thursday.

"It comes into effect immediately," the official, who could not be named, said.

Finance Minister Palaniappan Chidambaram announced the export levy in his 2007/08 budget speech on Wednesday, and an industry official said the provision applied to all grades of iron ore.

"This will be very detrimental," said Glenn Kalvampara, joint secretary of the Goa Mineral Ore Exporters Association.

Kalvampara said there was chaos among iron ore exporters after the imposition of the duty, and several buyers had cancelled or diverted shipments.

He said the tax would cut heavily into the margins of firms exporting low grade iron ore with below 60 percent iron content.

Indian steelmakers have been calling for a ban on iron ore exports to preserve the raw material for domestic steel firms, but the ore industry says that the local industry does not have adequate capacity to absorb mine output.

"Goa is going to be hurt very badly. Some of us may have to close down our operations," Kalvampara said.

The resource-rich southern state, which accounts for more than a third of India's iron ore exports to China, exported 36 million tonnes of ore in the year ended March 2006.

India's total exports in the same period stood at 90 million tonnes. Its total iron ore reserves are estimated at 22.10 billion tonnes.

More than half of India's iron ore production is exported, with a major portion going to China.