Roll back 5% export duty on iron ore pellets: Mines ministry to FM

Written by Prashant Mukherjee | New Delhi | Updated: Feb 27 2014, 10:59am hrs
The mines ministry has asked the finance ministry to roll back the recently imposed 5% export duty on iron ore pellets, saying the move will cripple investments worth Rs 50,000 crore in the domestic pelletisation industry.

The move is hurting the entire pelletisation industry. We have written a letter to them (the finance ministry) and soon we will give our presentation. We have to ensure that huge investments in the sector do not turn into non-performing assets, a mines ministry official said.

Iron ore lumps and fines attract 30% duty, but till the new levy, there was zero duty on pellets. Kalyan Banerjee, chairman of the standing committee on coal and steel, has also been pushing for the withdrawal of export duty on pellets.Industry experts said the move has put brakes on expansion plans of the country's pelletisation industry.

Experts believe that state-run Kudremukh Iron Ore Company (KIOCL) may also have to close down its pellet production in Karnataka like Stemcor as the export duty would wipe out its margins. KIOCL, the government entity, has already written a letter to the steel ministry for removal of duty.Companies such as Jindal Steel and Power, Essar Steel, Bhushan Steel are also apprehensive about their future plans as they have installed large pelletisation plants in the country. India has about 36 iron ore pelletisation plants run by steel companies.

According to the Pellet Manufacturers Association of India (PMAI), the government encouraged investments in beneficiation and pelletisation plants by reducing customs duty from 7.5% to 2.5% in 2011-12 budget. This was aimed at using low-grade iron ore fines that had no takers.

Since then, the pellet capacity in India has increased from 23 million tonnes (mt) in FY2011-12 to 74 mt in FY2014-15. The capacity is expected to be raised to 120 mt by FY2016-17.