The Indian Government says it will hike its tax on iron ore exports in a bid to transform India from an exporting country into one that ships value-added items.

Steel Minister Virbhadra Singh said India is a key producer of iron ore, a major portion of which is exported at low prices.

India needs to implement a policy that motivates value-added exports which will garner more revenues for the country, he said.

The ministry wants to raise the tax from the current 5%. A new target tax is yet to be established.

In 2008 India demanded a 15% ad valorem duty on iron lump exports and a large lump sum tax on iron ore fines, according to CommodityOnline.

Government officials said the government should slowly phase out its exports of high-grade ore, which should be kept aside for local steel makers.

Steel makers back the ministry’s view saying they require more ore to increase capacity to 85 million tonnes by 2011.

Iron ore miners, however, say India has adequate reserves to satisfy the demands of the steel industry and overseas market.

India annually produces 155 million tonnes of iron ore, of which 89 million tonnes is exported, mainly to China.