Reeling under the impact of the 5 per cent export duty which the Finance Ministry had imposed on iron ore pellets in January this year, which the industry claims has increased the risk of several pellet making units shutting shop and 80,000 people involved in the industry losing their livelihood, the Mines Ministry has sought urgent intervention of P Chidambaram in the matter, urging him to withdraw the duty at the earliest.
Mines Minister Dinsha Patel has written to the Finance Minister, seeking his personal attention in the matter to waive off the export duty on iron ore pellets, "which would go a long way in protecting the interest of the industry". Patel wrote the letter after receiving a petition from SK Chatterjee, Secretary of Pellet Manufacturers' Association of India (PMAT) requesting the withdrawal of 5 per cent export duty on iron ore pellets.
The origin of the matter has its genesis in the contentious issue of iron ore exports, over which the Mines, Steel as well as the Commerce Ministries have been at loggerheads. The steel sector is of the view that in future when the country's steel making capacity will go up, then at that time there should be adequate reserves of iron ore in the country to meet the demand. Thus it has always favoured a cap on export of the precious raw material.
On the other hand the mining industry feels that by exporting more, Indian mining companies would not only generate more revenue but also be encouraged to mine deeper which may lead to exploration of greater mineral resources. The Commerce Ministry on its part has in general favoured greater exports in order to address the country's disparity in Balance of Payment, wherein imports outrun the exports.
In such a scenario, the Finance Ministry had levied a 5 per cent export duty on iron ore pellets in January this year on the request of the Steel Ministry, which suspected that in the garb of pellets, iron ore was being exported out of the country by the industry. Meanwhile, Patel in his missive to Chidambaram, citing the sorry state of affairs prevailing within the pellet industry and quoting PMAT's petition to him, has informed the Finance Minister that currently the pellet units are operating at less than 50 per cent capacity utilisation due to lack of domestic demand.
Apart from citing the danger of around 80,000 people associated with the industry facing the threat of losing their jobs owing to poor demand and the imposition of export duty, Patel has gone on to add that around Rs 35,000 crore of investment in the sector will turn into non-performing assets (NPAs) and railways as well as ports sectors will stand to lose substantial revenue.
Also "this will adversely affect KIOCl (Kudremukh Iron ore Company ltd), which is a public sector undertaking", the Mines Minister further added in the letter. KIOCl has a pelletisation plant in Mangalore as well as iron ore reserves along the Western Ghats. Pellets are basically value-added products of leftover material or low grade iron ore and are used in steel-making. In recent times, they have emerged as a major product for iron and steel industry in the country due to scarcity of ore in some regions following mining bans in Karnataka and Goa.
According to industry estimates, India's pellet production capacity is currently at about 60 million tonnes and has risen manifold since 2010-11 as government then encouraged value addition of iron ore fines.