India’s finance ministry is considering removal of customs duty on iron ore, a move that would give some relief to steel companies facing raw material crunch.

"Steel ministry is pitching for removal of import duty...we are examining it," a ministry official said. The government had raised export duty on iron ore to 30% from 20% in the last budget to ensure availability of iron ore to domestic manufacturers.

The measure was expected to provide some respite to steel makers, but availability of high-quality iron ore has continued to remain under pressure following a ban on mining in states such as Karnataka.

Presently, iron ore imports attract customs duty at the rate of 2.5%.

Another government official said there was a case for removing it since the export duty on iron ore had been increased.

"If on one hand there is a move to discourage exports from the country to increase availability then there is a case for lowering duty on imports of the same raw material," the official said.

Industry body Assocham had made a strong pitch for scrapping duty on iron ore lumps, fines and pellets.

"The 2.5% import duty on import of raw materials has caused a burden on the domestic steel companies and they are running below full capacity," the chamber had said earlier.

Global iron ore prices are around $130 per tonne for the high quality grade of iron ore, which has 63-64% ferrous content. Prices of iron ore remain subdued in the wake of weak Chinese demand and the domestic industry feels that it could take some advantage of low prices.

Imports from Middle East or Brazil are turning out to be cost effective for the domestic steel makers due to high rail freight charges in the country and the removal of the duty would make it more so.