Apex industry body Assocham has urged the centre to impose 30 per cent export duty on iron ore pellets, fines and lumps with immediate effect to discourage circumvention of export duty and increase iron ore availability for domestic steel industry.
“The iron ore production in India has plummeted significantly by 14 per cent to 70 million tones (mt) in the first half (H1) of 2013-14 from the level of 82 mt in the corresponding period last year,” said The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in a communication addressed to the union 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 mt in the second quarter (Q2) of the ongoing financial year 2013-14 from 2.33 mt in the first quarter (Q1),” said Assocham.
“Ironically, while the domestic iron and steel industry is facing severe shortage of iron ore and is operating at very low capacity utilization, at the same time the exports of iron ore are registering a triple digit growth on sequential quarter basis.”
“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.
While the crude steel production in India has grown by three per cent in H1 of 2013-14 as against the same period of 2012-13, there has been a continuous growth in demand for steel in India and to fulfil the same there has been significant upsurge in imports of steel and its related commodity like scrap, direct reduced iron (DRI) and pellets. “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 has thus appealed to the government to take an immediate action to restrict export of iron ore pellets from the country which is bleeding India’s economy by contributing to rising current account deficit (CAD).
Even Indian Railways considers pellet export as indirect way of exporting iron ore as it considers export of iron ore and pellets in same category and impose railway freight even in case of export of pellets, highlighted Assocham.