Export duty on iron ore pellet a setback, say producers

During April-Nov 2013, the exports of pellets have risen sharply, causing an apprehension about shortage of iron ore in the country

The decision to impose 5% export duty on iron ore pellets is a setback for the industry, which is known for upgrading the low grade ore into usable raw material, said pellet producers and pro-mining lobby bodies.

“It is a huge setback for the pellet industry because as pellet producers we have to pay excise duty and now the export duty comes as additional burden,” said N D Rao, managing director of Brahmani River Pellet Ltd (BRPL), a unit of Stemcor that has four million tonne a year pellet plant in Odisha.

The Custom and Excise department of the Union government, in a recent notification said ‘considering the domestic requirement of iron ore pellets, the Government has decided to impose an export duty of 5% on iron ore pellets’.

Currently  iron ore fines and lumps are levied an export duty of 30% on selling price. Iron ore pellets were however exempted from payment of export duty as the government wanted to encourage value addition of fines that were otherwise exported and had no takers in India.

Taking advantage of the government incentives on import of pellet-making equipment and nil export duty, large capacities were added in last two years, taking total production capacity in the country to nearly 60 million tonne from 28 million tonne in 2010-11.  

Till 2012-13, exports of iron ore pellets were negligible.

“However, in April-November 2013, exports of iron ore pellets have risen sharply, causing an apprehension about shortage of iron ore in the country,” the Finance Ministry said in a statement.

Trade estimates said so far, nearly one million tonne pellet has been exported, which is less than 1.5% of total installed capacity. KIOCL tops the list as the lead exporter, followed by Jindal Steel and Power Ltd (JSPL). Essar Steel and BRPL also export pellets in limited quantity to Southeast Asian nations.

In December last year, domestic steel industry has called for an imposition of 30%  export duty on iron ore pellets in view of rising exports in the face of ore shortage being faced by the companies. Mining lobby body said the decision is skewed towards steel maker’s lobby.

“The recent decision to impose export duty on iron ore pellets shows that the Union government is influenced by steelmakers’ lobby. This will hurt future investment in pelletisation capacity,” said R K Sharma, secretary-general of Federation of Indian Mineral Industries (FIMI).

Pellet producers said since many large steel plants have their own pellet plant and other do not have the facility to use domestically available blast furnace grade pellets, it will affect the pellet manufacturers and will lead to curb on productions.

“Pellet manufacturers strongly feel that the Union Government is playing into the hands of a handful of steel makers. We urge the Government to reconsider their decision and exempt pellet from export duty,” said S K Chatterjee, Secretary  of Pellet Manufacturers’ Association of India (PMAI) in a statement today.