Reconsider export duty on iron ore pellets: Commerce ministry to FinMin

Last month, ministry of finance imposed export duty of 5% on iron ore pellets

The commerce ministry has conveyed its views to the finance ministry and the steel ministry against imposition of five per cent duty on iron ore pellets’ exports. It has asked the finance ministry to reconsider this duty, stating the move would only cripple the Rs 35,000-crore investment that has taken place in the sector in the last three years.

In a letter to the revenue department of the finance ministry dated February 7, the commerce ministry said value-added products were central to the country’s export basket and hence should not be discouraged. Business Standard possesses a copy of the letter.

“Export of pellets help not only in utilising this capacity without hurting the domestic steel industry, but also contribute to earning valuable foreign exchange that helps bridge the current account deficit. Therefore, the decision to impose export duty on pellets gives contrary signals to the industry.”

Last month, the finance ministry imposed an export duty of five per cent on iron ore pellets following recommendations from industry body ASSOCHAM.

Iron ore pellets already carry a 12.5 per cent excise duty. An additional five per cent export duty would only hurt the industry further as it is currently running at less than 50 per cent capacity utilisation, a source from the Pellet Manufacturers’ Association of India said.

The country’s total installed pellet capacity stands at 80 million tonnes, with most concentrations in Odisha, West Bengal and Chhattisgarh.

Due to weak demand from domestic sponge iron manufacturers, the capacity utilisation of pellet plants in the country has already dropped drastically. An export duty would hamper the industry further.

In its letter, the commerce ministry also said, “The present level of pellet exports is a very small percentage of production and even less of installed capacity. Neither is pelletisation capacity under stress nor availability of iron ore fines for domestic steel industry constrained. In these circumstances, we urge you to reconsider the decision to impose the export duty.”