Moneycontrol
Jan 06, 2016 08:13 AM IST | Source: PTI

Govt abolishes export duty on iron ore pellets

In 2014, the government had levied a 5 percent export duty on iron ore pellets, which are value-added products of leftover material or low-grade iron ore and are used in steel-making.

Govt abolishes export duty on iron ore pellets

The government has reduced export duty on iron ore pellets to zero from 5 percent, a move that will make the commodity more competitive amid subdued demand and weakening prices.

In 2014, the government had levied a 5 percent export duty on iron ore pellets, which are value-added products of leftover material or low-grade iron ore and are used in steel-making. A notification in this regard was issued by the Central Board of Excise and Customs (CBEC) yesterday.


Welcoming the decision, Steel and Mines Minister Narendra Singh Tomar tweeted: "The government removes 5 per cent export duty on iron ore pellets. This would improve capacity utilisation of pellet plants and give a necessary boost to the sector."

Iron ore pellet makers as well as some miners had earlier sought a reduction in the export duty on iron ore to make it more competitive. Steel and its related raw material market is facing a tough time on account of subdued demand and high production, adversely impacting the prices.


Besides, a fall in demand in China, the worlds' biggest metal consumer, is leading to the country dumping excess steel and other finished products in consuming countries, including India, a move that has hit the top line and bottom line of mining and steel companies.

Pellet Manufacturers Association of India (PMAI) Secretary General Deepak Bhatnagar said the industry had been pursuing the withdrawal of the export duty since 2014 when it was levied, adding that the pellet industry's capacity utilisation has dropped to 35 percent.

"The pellet prices have dropped from a level of USD 130 per tonne when the export duty was levied to USD 59 per tonne now, making exports non-viable," he added.


"The government can now take immediate remedial measures by removal of distance-based charges for movement of pellets as well as changing the classification for movement to class 140, which is applicable to manufactured and finished products like cement."

He faulted the classification of iron ore, saying pellets are a finished product. He also suggested introduction of a mechanism to bring down sale price of iron ore charged by miners "drastically" and rationalisation of the royalty structure of the government. The wish-list also included extension of the export obligation time period under EPCG scheme by 5 years without any interest and penal fee.


"To discourage pellet imports, the government needs to impose an import duty on iron ore lumps and pellets of up to 30 per cent," Bhatnagar added. India has an iron ore pellet production capacity of about 85 million tonnes per annum. 

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