Centre urged to withdraw export duty on pellets

On January 27, 2014 the govt levied 5% export duty on pellets

Don't want to miss the best from Business Standard?

Ahead of the interim Budget, Kalyan Banerjee, chairman of the standing committee on coal and steel, is pushing for the withdrawal of export duty on pellets.

In a letter to Steel Minister Beni Prasad Verma, Banerjee said, “Unless the export duty is withdrawn, employment will be seriously affected. It is always desirable the government proceeds on the basis of its promise. This is because keeping this promise in mind, a large number of industries made huge investments. The government should not back out.”

Earlier, a January 27 government notification of five per cent export duty on pellets had led to concern.

According to the Pellet Manufacturers’ Association of India (PMAI), the government had encouraged investments in beneficiation and pelletisation plants by reducing customs duty from 7.5 per cent to 2.5 per cent in Budget 2011-12. This was aimed at using low-grade iron ore fines that had no takers. PMAI claimed investors had committed about Rs 35,000 crore to increase pellet capacity in India — from 23 million tonnes (mt) to 80 mt in FY14. The capacity is expected to be raised to 120 mt by FY16.

“Currently, the sector’s capacity utilisation is as low as 50 per cent, owing to low demand and offtake from domestic steel and sponge iron plants. Exports stand at 1.67 per cent of the installed capacity,” said a PMAI member. Pellets also draw 12 per cent excise duty.

Banerjee also urged the steel ministry to facilitate iron ore beneficiation to ensure low-quality iron ore is fully utilised by domestic steel plants. “I request the government to continue with the earlier policy of zero per cent export duty on pellets till the domestic steel sector, including public sector undertaking, is able to fully consume domestically produced pellets so that huge investments made in the pellet industry do not become non-performing assets,” he said in the letter.