Pellet makers seek rollback of export duty

Want 15% import duty on iron ore lumps, steel products

Pellet manufacturers across the country who are operating at barely 35 per cent of their installed capacity of 83 million tonne per annum (mtpa) have moved the Government to remove five per cent export duty on pellets.

Citing surplus availability of iron ore and pellets in the country, the Pellet Manufacturers Association of India (PMAI) has also demanded levy of at least 15 per cent import duty on iron ore lumps and steel products and removal of distance based railway freight on export of iron ore pellets.

“By considering these policy measures, the pellet industry will have the potential to earn foreign exchange earnings of more than $5500 million per year by selling pellets at an estimated price of $100 a tonne. The present taxation on iron ore pellets is only killing the pelletisation industry and putting over 100,000 people into risk who are employed directly and indirectly in this sector”, N D Rao, president, PMAI said in a letter to Union finance minister Arun Jaitley.

Imposition of five per cent export duty on iron ore pellets since January 2014 has impacted the pellet industry negatively. It has also resulted in loss of excise revenues (pellets attract 12.5 per cent excise duty) as well as foreign exchange earnings due to decrease in production of pellets.In the absence of demand in the domestic market, the pellet plants are operating at only 35 per cent of their capacity, resulting in closure of various plants in the country.

PMAI represents over 20 pellet manufacturers in the country with an installed capacity of 83 mtpa. These manufacturers have invested over Rs 40,000 crore.

Pellet industry is also under stress due to flood of cheaper imports. Imported pellets are being sold in the country at Rs 4500 per tonne while domestic production cost works out to Rs 6500 a tonne.

According to PMAI, large quantities of iron ore fines, pellets and steel products are being imported to the country, forcing pellet and steel manufacturers to cut capacities. Amid such an unfavourable scenario, pellet plants are running the risk of their assets being declared as NPAs (non-performing assets) by the banks.

Separately, PMAI has written to Railways minister, seeking removal of distance based railway freight for pellet exports.

"Due to the imposition of distance based charge of pellets, no export of pellets is taking place for the last one year which has resulted in empty rakes plying to the ports such as Haldiam Dhamra, Paradeep, Gangavaram and Visakhapatnam. The total estimated annual revenue loss to Railways due to empty rake movement is Rs 2280 crore which otherwise could have been avoided", PMAI said in the letter to Railways minister Suresh Prabhu.

Rao said, since most of the iron ore mines across the country have resumed their operations resulting in surplus iron ore availability, there is a strong case for imposing distance based railway freight on imported iron ore lumps to discourage imports.