Exporters unlikely to benefit from duty exemption

Earlier, pellet exports used to attract five per cent duty

Indian exporters are unlikely to benefit from the government’s decision to exempt iron pellets from export duty because of falling prices in global markets.

Pellet exports used to attract five per cent duty before the exemption was announced on Tuesday.

The benchmark variety of pellets with 65 per cent Fe is hovering around $57 after hitting a high of $180.2 in February 2012. Prices have recovered after falling to their December low of $54.4 but experts see the recovery as temporary.

Produced through various metallurgical processes to reduce transportation cost, pellets are high quality iron ore. Low-grade iron ore can be converted into pellets that contain up to 96 per cent iron. Steel mills use pellets to save energy costs.

“The exemption in export duty on pellets came at a time when Chinese steel mills face huge stockpiling. Since iron ore exports are not happening from India, shipment of pellets looks impossible. The exemption may not benefit Indian pellet mills at all,” said RK Sharma, secretary-general of the Federation of Indian Mineral Industries.

Indian miners produce a huge quantity of low grade ore with iron content as low as 35 per cent, which steel mills avoid lifting. The government levied a 30 per cent of export duty on iron ore to discourage its exports and the shipment of pellets was promoted. Later, a five per cent of export duty was levied on pellets as well.

Private players have invested Rs 1,000 crore to set up 80 million tonnes of pellet production capacity. These mills are operating at 50 per cent capacity because of weak demand locally and overseas.

“The exemption will benefit government companies. A huge quantity of iron ore fines is lying with NMDC, which will be supplied to Kudremukh Iron and Steel, a pellet production plant owned by the government. Pellets produced there will be supplied to steel mills in Iran,” said Haresh Melwani, an iron ore miner and exporter.