The Indian government is planning to include in next year's budget a line-up of incentives to encourage the country's iron ore miners to conserve the raw commodity for domestic use.

"The government may announce incentives for the iron ore miners to encourage more value-addition and pelletisation. The Steel Ministry has already sent a proposal to the Finance Ministry for this matter," the Economic Times India reported, citing an unidentified source.

Among the incentives the Indian government is mulling includes extending tax holidays to miners to encourage the development of pellet capacities.

Pellets, created in globules form from very fine iron ore, are mostly used to produce sponge iron, as well as in blast furnaces in some countries.

India, while one of the world's top iron ore exporters, has poor technology or almost none in pellet making. Of the 388 million tonnes of pellet production in 2010 around the globe, India contributed only a measly 18 million tonnes.

In end December 2011, India's Ministry of Commerce hiked the export duty tax to 30 per cent from 20 per cent on both iron-ore fines and lumps. Before this, earlier in the year, it raised to 20 per cent from five per cent and 15 per cent, respectively, duties on both iron-ore fines and lumps, while exports of iron ore pellets are exempted from any duty. The pronouncements had generated its fair share of remarks and observations from both Indian mining firms and steel companies, with the latter seen to benefit much from the increase.

"Iron ore is a natural resource which needs to be conserved," Indian Finance Minister Pranab Mukherjee said in the Economic Times India. The exemption of any duty on pellets is meant to urge the miners to conduct value addition process for iron ore fines, he added.

The government's efforts in hiking the export duties has given favorable results. India's exports of iron ore exports dropped 30 per cent to just 40 million tonnes during the April-November period from 51 million tonnes a year ago.

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India Slaps 30% Hike on Iron Ore Exports, Creates Uproar Among Mining Firms