JSW Steel wants higher export duty on iron ore pellets

Steel makers have been complaining for long that producers export iron ore as pellets

JSW Steel has opposed removing an export duty of five per cent on iron ore pellets. In fact, it wants this raised to 30 per cent.

Steel makers say they are already plagued by a shortage of iron ore. They have been complaining for long that producers export the ore in the form of pellets (as there is little value addition in converting ore fines to pellets).

The finance ministry imposed the duty last month to curb rising exports of pellets in April-November 2013 from insignificant amounts in the previous financial year even as ore output fell.

Parliament’s standing committee on steel recently urged the government to do away with the export duty to save the pellet sector.  The commerce ministry has also asked for rolling back the duty to support pellet makers. Finance Minister P Chidambaram is expected to make an announcement in this regard on Monday in his interim Budget.

“The steel industry is already suffering from lower production of iron ore from Karnataka and Goa. Karnataka used to produce more than 40 million tonnes (mt) but due to the cap by the Supreme Court, production has come down to eight-10 mt. A recent order by the Odisha government putting a cap of 44 mt on iron ore despatches from the Joda region has worsened the present crisis in the country,” said M V S Seshagiri Rao, joint managing director, JSW. The company runs three steel plants in Karnataka, Maharashtra and Tamil Nadu, with a total capacity of 14.3 mt.

Rao said capacity use in the iron and steel sector had been falling continually on shortage of raw materials such as iron ore, pellets, scrap and sponge iron. Capacity use fell to 82 per cent in 2011-12 from 88 per cent in 2010-11 and further in 2013-14. Rao said removing the export duty on pellets would further worsen supply of raw materials in the country.

Iron ore output in the country fell to 142 mt in 2012-13 from 218 mt in 2009-10 and is expected to drop further in 2013-14. In April-October 2013, 80 mt of iron ore were produced against 92 mt in the year-ago period, Rao said.

Ore requirement has been growing with rising steel output in the country. In 2013-14, steel makers would need 137 mt ore to produce 84 mt steel, while ore output is estimated at 135 mt, Rao said.

Ore export in the past financial year was 18 mt and touched 10 mt this year till September. Ore output falling to 80 mt in April-October 2013-14 from 92 mt in the year-ago period has made things difficult for local steel makers, Rao added.

“This export is being done mainly in the form of pellets. At present, duty on iron ore (lumps and fines) export is 30 per cent. Therefore, exporters are shipping out pellets by paying only five per cent duty. The pellet exports were nil in 2012-13, while this year, it has already reached the level of 430,000 tonnes,” Rao said. He said steel makers were unable to make optimum use of capacities as the ore was diverted for pellet production, which is eventually exported.

“It is incorrect to say export of pellets is to be encouraged by withdrawing the export duty on the pretext of investment of Rs 35,000 crore. The steel sector, which has invested over Rs 5 lakh crore, is in distress due to shortage of iron ore,” Rao said.

 

Meanwhile, the iron ore industry is awaiting an announcement regarding the reversal of 5 per cent export duty by the Finance Minister P Chidambaram in his vote on account budget on Monday.