Iron ore pellet manufacturers are opposed to a proposal from merchant mining entities to reimpose export duty on it. At present, pellets, an intermediate product in the process of steel making, enjoy a duty waiver regardless of iron content.
Since pellets compete directly with iron ore lumps in the domestic market, they have limited demand, as lumpy ore offers a price advantage to steel companies. The only viable outlet for pellet makers is export. Apart from fragile demand in the domestic market, they are also wrestling with other business headwinds like high conversion cost and unavailability of ore fines (used in pellet making) at affordable prices.
Due to the constraining factors, 23 per cent of the country’s pellet making capacity of 85 million tonnes per annum (mtpa) is idling. In 2018-19, around 9.3 mt of pellets were exported, only 15 per cent of total production.
“Merchant iron ore miners, through a mining association, are pressing hard on the Union government to impose export duty on pellets, a value added item and kept free from the duty by both UPA and NDA governments” said an industry source.
Any duty on pellets will not be of any benefit to the miners but in fact be counterproductive, since pellet producers are major buyers of iron ore fines/beneficiated fines. This would also cause huge losses to the pellet industry and to the government, due to reduction in foreign exchange being earned through this sector,” said an industry source.
He suggested a much higher duty be imposed on non-value added material like ore fines. And, to raise the duty on import of ore lumps from the present 10 per cent to 30 per cent, to encourage pelletisation in India.
Pellet makers say they pay an 18 per cent goods and services tax on their products but only five per cent is levied on despatch of iron ore fines. They contend pellets are environmentally friendlier as a feed into sponge iron making and blast furnaces ass compared to ore lumps.
It is learnt the Union monistry of steel has asked a public sector unit for a study on the possibility of pellet makers using above 58 per cent iron content ore for making and exporting pellets which are free from export duty.