Union Mines Minister Dinsha Patel is lobbying for the iron ore industry, citing wrong policies chocking their mines with huge dumps of unexported ore fines leading to "loss of not only customs duty to the Centre but also royalty revenue to the state governments."

In a letter to Finance Minister P Chidambaram, he has called for an immediate rollback of export duty on fines from 30 to 15 percent ad valorem and suitable rationalisation of the high rail tariffs "for restoring iron ore production," as measures to stop continuing fall in exports and space constraints forcing miners slash production.

He claims that the primary reason for decline in the production of iron ore impacting the domestic steel industry is the hike in customs duty and railway freight making exports unviable "resulting in piling up of ore at mine heads slowing down the production."

The one-page letter written last Thursday points out that fines constituted 61 percent of total production in 2010-11 and "due to the limitation on the area available for staking fines on their lease area, the miners are forced to reduce their overall production."

Patel's worry is over "increase in mine-head stocks from 88.8 million in 2010-11 to 104.2 million tonnes in 2011-12, adversely affecting the production of iron ore, including lumps for domestic market."

He attributes the crisis faced by the iron ore miners to very high export duty on fines which was raised from 5 percent ad valorem to 20 percent ad valorem in March last year and then 30 percent ad valorem in December, differential freight on export of iron ore and the decline of the international prices of iron ore.

Patel writes that this has substantially reduced the profitability of the iron ore export that fell drastically from 123.43 million tonnes in 2009-10 to just 47 million tonnes in 2011-12.