India has invited China, the biggest importer of its iron ore, to set up pellet plants in the country.
The Chinese steel makers have been asked to take full advantage of the zero duties on pellet exports from India besides the drastic reduction in customs duty on imports of pellatisation machinery into the country.
Pellets are made by moulding ore powder into desired configurations, with some value addition.
It is a win-win deal for the Chinese steel industry to set up pelletisation plants in India as it would make up for the extra expenditure being incurred by them in view of 30% duty on iron ore exports from India, C S Verma, Chairman of Steel Authority of India (SAIL), said.
Verma, who signed an MOU with the Chinese Iron and Steel Association (CISA) to step up interaction between the two major producers and consumers of steel, invited them to set up their plants in India.
He said they could take full advantage of the new duty structure in India to encourage setting up of pelletisation plants.
Indian iron ore which has traditionally been the top item of exports to China has dropped by 14% to $9.6 billion in value terms during 2011 due to restrictions on mining ore from Karnatake and Goa, compared to the $11.2 billion in 2010.
It was expected to come down further due to increase in export duty from 20% to 30% early this year.
Verma said, India, which has about 25 billion tonnes of iron ore reserves will continue to export it but at the same it would be advantageous to get value addition from the raw material.
"Since buying ore will be costlier, companies who need it have to nuetralise it.
"This is why we should export it in the value added form not in the mineral form," Verma said.
"It will create employment and investment opportunities for India to have the value addition," he said.
China has been importing 75 to 80 million tone of iron ore every year from India alone.
In the recent past, the Indian government has also reduced customs duty on the import of pellatisation plants from 7.5% to 2.5%.
"That means there is lot of incentives for setting up pellatisation plants in India," he said.
There is no export duty from India on pellets.
He said the Chinese companies have shown keen interest in the proposal.