China typically accounts for more than 90% of overall shipments of iron ore from India which is the world's fourth-largest producer of the steel-making ingredient.
The Ministry of Steel was considering an export tax on iron ore after India's small and secondary steel producers earlier this year petitioned the government to curb rising exports.
After examining the issue, the Ministry of Steel did not find any evidence to suggest that rising iron ore exports have hit the country's steel producers, said the source, who did not wish to be named as the plan is not public.
The Ministry of Steel did not respond to a Reuters email for comments.
India's mining industry opposes curbs on iron ore exports. It argues that India ships out only low-grade iron ore, which is not widely consumed within the country.
Small steel producers insist that they use low-grade iron ore, unlike big steel mills, and steady supplies at reasonable prices are vital for their relatively small profit margin.
India shipped out iron ore worth USD 3.9 billion during the fiscal year to March 2024, up 118% from a year earlier, according to government data.
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The Ministry of Steel would encourage mills to use hydrogen to cut carbon emissions, the source said. The government would work more closely with mills in their decarbonisation efforts, he said.
India, the world's No.3 emitter of greenhouse gases, has pledged to achieve a net-zero carbon emission target by 2070.
The Ministry of Steel has also asked the trade ministry to "defend the interest of Indian steel exporters" against Europe's carbon emissions tariffs, the source said.
A European Union plan to impose tariffs on high-carbon imports has rattled India's steel exporters.
Separately, the source said India's steel consumption would continue to post "double-digit" growth, boosted by rapid economic expansion and the launch of new infrastructure projects.
Steel consumption jumped 13.4% to 136 million metric tons during the fiscal 2023/24 year.
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