 "Pellet makers seek extension of EPCG scheme")
"The extension in time period should be without any penal fee. A favourable recommendation from the Finance Ministry would greatly help grant extension under EPCG scheme," Pellet Manufacturers' Association of India (PMAI) stated in a pre-Budget memorandum submitted to the Finance Ministry.
Pellet exports were not viable to meet export EPCG obligations since international market price for pellets has crashed to $63 a tonne while cost of production by domestic manufacturers was in the range of $85-108 per tonne.
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International market prices for pellets have have seen a steep fall from $162 a tonne in March 2014 to $63 per tonne presently. Other disabling factors which hurt pellet makers to fulfill their export obligations are levy of 5% export duty on pellets and exorbitant railway freight for exports of pellets
The government had reduced customs duty on plant and machinery for setting up pellet plants from 7.5% to 2.5%. The EPCG benefit was taken on the assumption that these pellet plants would start exporting soon after commissioning.
Later, the Union government imposed 5% export duty on pellets. Further, the Railways charged distance based freight tariff, rendering railway tariff to cost five times more for exports compared to domestic sales. Consequently, while cost of exports have increased substantially, the international prices of pellets have fallen sharply.
On central excise and service tax issues, PMAI has called for removing the time limit for claim of duty paid. Accordingly, Section 11B of Central Excise Act may be amended suitably and this time period may be extended up to five years, the PMAI suggested.
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Since the margins in pellet manufacturing are shrinking day by day, the pellet manufacturers have asked for cut in excise rate on pellet making from 12.5% to 5%. Corporate tax needs to be slashed to 25% from 30% presently.
Pellet makers are in distress with current capacity utilisation at less than 35% owing to low demand from steel industries. Pellet, an intermediate product in steel making, competes with calibrated lump ore in the domestic market. But, steel makers preferred to buy lumps since they were available at a price of around Rs 2,000-2,500 per tonne, cheaper than pellets.
The installed capacity of iron ore pellet manufacturers is 85 million tonne per annum. Pellet manufacturers have invested Rs 40,000 crore, employing around 100,000 people. Eleven pellet plants have already shut down, affecting thousands of jobs.
