Industry body Assocham has urged the Government to impose a 30 per cent export duty on overseas shipments of iron ore pellets with immediate effect. Such a move would ensure higher availability of raw material to the domestic steel industry as production of iron ore has declined in the current year.
At present, the iron ore pellets do not attract any export duty, while there is a levy of 30 per cent on overseas shipments of fines and lumps.
“The iron ore production has declined by 14 per cent to 70 million tonnes (mt) in the first half of the current fiscal from the level of 82 mt in the corresponding period last year,” Assocham said in a letter to the Finance Minister, P. Chidambaram.
“The rampant exports of iron ore from India have made it a rare commodity for the domestic iron and steel industry as exports of iron ore surged by a whopping 129 per cent to 5.33 m t in the second quarter of current fiscal from 2.33 mt in the first quarter (Q1),” it said.
Low capacity utilisation
The lower iron ore availability has hurt domestic steel production and the industry is operating at a very low capacity utilisation, while the export of the raw material is registering a triple digit growth sequentially. Crude steel output has grown by a mere three per cent in the first half of current fiscal.
“The growth in exports of iron ore is being achieved due to massive difference in exports duty of pellets and iron ore as there is 30 per cent duty on iron ore lump and fines whereas pellet exports do not attract any duty,” it added.
“Iron ore producers in India are taking an advantage of zero export duty on pellets and circumventing exports of iron ore through pellets, more so as there is hardly any value addition in conversion of iron ore fines to pellets,” said Assocham.
At the same time, the imports of steel and its related commodity like scrap, direct reduced iron (DRI) and pellets has seen a significant surge in recent months. “Almost $3.5 billion of precious foreign exchange have already been spent on imports of commodities like steel, scrap, sponge iron and iron ore pellets in the H1 of current financial year,” Assocham said urging the Government to take immediate steps to restrict export of iron ore pellet.