On July 22, the Indian industry body ASSOCHAM has suggested the Indian Finance Ministry should review its budget proposal to increase the royalty rate on iron ore from 10 percent to 15 percent with a view to maintaining cost competitiveness and sustainable growth of the domestic industry.
If the proposal is not dropped, the five percent increase in the royalty rate coupled with the 15 percent increase in the freight rate by the Ministry of Railways will further increase the cost of production of steelmaking and will push inflation upward, which will have a cascading effect on the Indian economy at large, ASSOCHAM noted.
"Setting up an integrated steel plant and development of mining projects are high-risk investments as they have a long development period and require large investments in exploration and other development activities before commercial production can begin. Therefore, the steel industry should be incentivized by ensuring the availability of secure supply of raw material at an appropriate price," ASSOCHAM secretary general D.S. Rawat said.
