The commerce ministry has asked the finance ministry to roll back the 5 per cent duty imposed on export of iron ore pellets, saying after making huge investments to increase their capacities, the pellet plants cannot be disincentivised as it could render their operations financially unviable. In a letter on January 5 to the revenue department of the finance ministry, the commerce ministry said it “does not support the imposition of the export duty on pellets. as value added products are central to India’s export basket”. Iron ore pellets are used as raw material for blast furnaces due to their metallurgical properties. The government had imposed the export duty last week on a proposal from the steel ministry, which had argued that iron ore was being exported in the garb of pellets, which virtually amounted to exporting the scarce mineral. The commerce ministry said iron ore pellets is treated as a manufacturing item and its producers have increased capacities after the government took several initiatives to motivate them to expand their operations. “Any export efforts requires accumulation of large pellet quantities unlike domestic operations, while quality parameters and other issues need to be addressed in export contracts which take time to work out,” according to the letter issued with the approval of commerce and industry minister Anand Sharma. The ministry said according to the Pellets Manufacturing Association of India (PMAI), while the export realisation does not cover the cost of production, exports helps to keep their operations running to at least part of the variable cost. “The export duty on iron ore pellets needs to be rolled back for protecting the nascent industry having huge potential,” the ministry recommended. However, the commerce ministry said that out of an installed capacity of over 75 million tonne, barely 25 MT is domestically consumed. It says the lack of low domestic demand has, in fact, compelled producers to cut down their capacity utilisation to less than 50 per cent. Leading pellet producers have told the finance ministry that while most plants would find it unviable to operate, bigger players may have to rethink on expanding the capacities unless the government addresses their concerns. According to the companies, of a total production of 75 million tonne, barely little over 1 MT is exported. According to PMAI sources, out of the roughly 80 pellet plants, about 30 would find their operations unviable owing to the duty.
