Bring down import duty on iron ore to nil: Assocham

Says drop in domestic iron ore production is forcing the steel industry to import iron ore from international market

As domestic iron ore output is on the wane, industry body Assocham today suggested the Commerce Ministry to prune import duty on the key steel-making input to nil and treble levy on pellet exports to 15%.

"The drop in domestic iron ore production is forcing the steel industry to import iron ore from international market... It is suggested that government may consider reducing import duty on iron ore to zero from the currently levied 2.5%," Assocham said in a memorandum to Commerce Minister Nirmala Sitharaman.

Country's iron ore production has come down to an all-time low of 144 million tonnes (MT) in FY'14 from the peak level of 218 MT in FY'10. The production is expected to drop further to a level of 90-95 MT in the current fiscal due to the recent order of the Supreme Court in case of Odisha state, it said.

India's annual steel production capacity now stands at around 100 MT and is expected to treble in next 10-15 years. It requires around 1.6 tonnes of iron ore to produce one tonne of steel.

Pointing at the anomaly in the duty structure of iron ore and pellets, an agglomerated form of the input, Assocham said presently, exports of pellets attract 5% duty whereas exports of iron ore fines and lumps attract 30%.

"Therefore, exporters are circumventing the exports of iron ore through pellets by paying only 5% export duty. The pellet export in 2012-13 was nil, while in the year 2013-14, the pellet export was 1.5 MT," it said.

Stating that export of pellets is draining mineral wealth of the country, export of steel would have been a better value proposition which would not only add extra value to the input but also create avenues for employment and revenue generation.

"Assocham had proposed to levy an export duty of 30% on pellets, however, the government may consider to increase it to at least 15% in the upcoming budget and later on it can be increased to 30%," the statement said.