No removal of pellet duty worries miners

Finance Minister (FM) P Chidambaram disappointed iron-ore miners and pellet makers by not withdrawing the five per cent duty on the export of pellets in the interim Budget 2014-15. These may consider closing pellet units and putting on hold investments of Rs 35,000 crore.

“We had requested the FM to announce a withdrawal. But, he chose not to. It will be a big disaster for the sector. Plants are operating at 50 per cent of their capacities,” said R K Sharma, secretary-general, Federation of Indian Mineral Industries.

He said investors were in the process of spending Rs 35,000 crore. But that and spending on units under construction may have to be put on hold.

“There is not much demand for pellets in India. There are hardly any margins. These go in duty payment.”

The ministry had imposed the duty last month due to the rising exports in April-November 2013 from insignificant exports a year ago, despite ore falling.

N D Rao, managing director, Brahmani River Pellet, a Stemcor group subsidiary, said, “We were expecting a rollback of export duty and a cut in excise duty.” Pellets are made from powdery ore and attract an excise duty of 12 per cent.

The Pellet Manufacturers’ Association of India (PMAI) said the government had encouraged investments in beneficiation and pelletisation by reducing the customs duty on the import of pellet-making equipment from 7.5 per cent to 2.5 per cent in the 2011-12 Budget.

Following the announcement, the PMAI said investors had committed Rs 35,000 crore to increase pellet capacity from 23 million tonnes to 80 mt in FY14 in India. It is expected to be raised to 120 mt by FY16.

“Some relaxation in the excise duty could have offset the impact of the export one,” said an Odisha-based pellet maker.

Around 35 million tonnes are produced in India. Most is consumed locally. A few were exporting to China and southeast Asia, taking advantage of the zero duty till December.