Reeling under squeezed margins due to imposition of 5 per cent export duty, at least five major iron ore pellets producers have shut down their operations during the past two weeks, while others are preparing to follow suit.
The finance ministry had, on January 27, imposed the export duty at the behest of the steel ministry, which had argued that iron ore was being exported in the garb of pellets and there is a pressing need to disincentivise it.
A top official of the Pellets Manufacturing Association of India said pellet producers have sought the UPA chairperson Sonia Gandhi’s intervention on February 21 in rolling back the export duty. While commerce minister Anand Sharma and mines minister Dinsha Patel have asked for withdrawing the duty. However, the finance ministry wants the duty to continue.
UK-based Stemcor’s India subsidiary Brahmani River Pellets Ltd has already closed its facility in Orissa. Essar Steel has closed down operations in its 6 million tonne per annum pellet producing facility at Paradip owing to depleted demand and squeezed margins.
Shivramkrishnan Hariharan, chief commercial officer of the company said, “Essar’s operations have been stopped since early February 2014, as the sudden levy of export duty coupled with lack of adequate domestic demand are making operations unviable.”
Ravi Uppal, Group CEO, JSPL contended that “irrational and adhoc” levy of 5 per cent export duty is bound to result in the closure of the pellet industry putting at risk large investments. Godavari Power and Ispat has closed down its operations at Raipur plant in Chhattisgarh and is preparing to do so in its Orissa utility from March 3 totaling 2.4 MT capacity. The firm’s managing director BL Agrawal said, “We have no options and had to do so in view of low demand. The cost of operations are disproportionately higher than returns,” he said.
Ardent Steel has also decided to close down its Orissa operations from March 4 as it is finding it hard to survive.
The Kolkata-based Shyam Group says its board would soon take up a proposal to review the Orissa pellet operations in view of the export duty. The firm’s VC and MD B Bhushan Agarwal says the capacity utilisation of the company’s plant is down by 75 per cent.