 "Pellet makers look to govt for cut in export duty, freight cost")
Against the nationwide installed capacity of 83 million tonne per annum (mtpa), pellet manufacturers were operating at barely 30-35% of their rated capacity. Apart from high cost of iron ore fines, lukewarm demand for pellets in the domestic market had shrunk capacities of pellet plants.
Pellet, an intermediate product in steel making, competed with calibrated lump ore in the domestic market. But, the huge price differential had positioned pellet makers in a tight spot. Pellet prices were ruling at Rs 6,000 - Rs 6,500 a tonne compared to lumpy ore available in the range of Rs 3,000 - Rs 3,500 per tonne. Cheaper imports of pellets from China in the price band of Rs 400 - Rs 4,500 a tonne had compounded the woes of pellet manufacturers.
N D Rao, President, Pellet Manufacturers' Association of India (PMAI) said, "Pellet makers have to be from the country since pellets cannot compete with iron ore lumps. The Government of India needs to fine-tune its policies for exports by removing export duty and reducing railway freight for pellet transport. Today, only shore-based pellet makers like KIOCL and Essar Steel are finding exports viable due to logistics advantage."
He suggested the introduction of a safeguard duty for pellet makers on the lines of the one for stee makers to counter the upsurge of imports from China.
PMAI had earlier moved the Finance Ministry to remove the 5% export duty and instead, impose levy of at least 15% import duty on iron ore lumps.
"Without assured forward linkages to cater to the captive needs of the steel plants, pellet plants are struggling to maintain their operational viability. For instance in Odisha, production capacity of pellet plants is 32 mtpa compared to that of the steel plants at 19 mtpa. Therefore, the government needs to incentvise pellet exports from the country by announcing a cut in export duty. For facilitating exports, the distance-based railway freight charges have to be reduced drastically for the pellet plants located in the hinterland since their internal logistics cost is much higher compared to shore-based plants," said Manish Kharbanda, Executive Director and group head, Mines & Minerals at Jindal Steel & Power Ltd (JSPL).
Analysts feel heavy export duty and high cost of production have rendered domestic pellet makers uncompetitive in the international market.
"Given high cost of pellet production, significant export duty and applicability of distance based charge of Indian Railways for pellets meant for export, Indian pellets are not able to compete in the international market. Further, low prices of iron ore and continuous decline in premiums for high grade pellets (Fe grade of over 66%) has made the situation difficult in both domestic and international markets. Thus, suitable policy interventions may be required to make Indian pellets competitive," said Pukhraj Sethiya, Associate Director, Energy (Coal and Mining), PricewaterhouseCoopers (PwC).
He said, Iran was a lucrative market for pellets as suppliers commanded premium in the range of $10 over the existing premium for high grade pellets.
Essar Steel was a major pellet exporter to Iran in the last fiscal. Out of the total share of pellet exports made to Iran, Essar Steel had 85% share. In this fiscal, Essar Steel has exported 0.29 million tonne pellets to Iran and also some to China and UAE.
KIOCL, a PSU, plans to import one million tonne iron ore fines from Iran's Gol Gohar mines. The fines would be converted to pellets at KIOCL's Mangalore plant and shipped to Iran.
