Pressing for withdrawal of 5 per cent duty on export of iron ore pellets, the Ministry of Commerce and Industry today said the levy will discourage shipments of value-added products.
"Value-added exports must be encouraged," Commerce and Industry Minister Anand Sharma said, adding that the duty acts as a "disincentive."
Commerce Secretary Rajeev Kher said the ministry is talking to the Revenue Department on the matter.
"We have clearly drawn to their (Finance Ministry) notice that this is something which is a big disincentive to an initiative which we have taken a couple of years ago, where we consciously want to evolve the (exports) industry because these (iron ore pellets) are value-added products," Kher said. The duty was imposed on January 27.
He said of the current annual pellet output capacity of about 80 million tonnes, production is 50 per cent.
"Exports are just about 1.07 per cent. Exports are minuscule. Therefore it is unlikely that (the exports) will have an adverse effect on availability," he told reporters here.
Mines Minister Dinsha Patel, too, has asked Finance Minister P Chidambaram to withdraw the duty.
The Pellet Manufacturers' Association of India (PMAI) had expressed apprehension over Rs 35,000 crore of investments becoming non-performing assets due to the export duty because domestic demand is too low and most producers are operating at less than 50 per cent capacity.
It also said the investments were made following the government's policy measures of 2011-2012 to promote the manufacture of iron ore pellets.
If the duty on pellets continues, it would lead to gradual closure of units and affect 80,000 people employed directly or indirectly by the industry, it has said.
The export of raw iron ore or fines and lumps already attracts export duty of 30 per cent.
Pellets are value-added products of leftover material or low-grade iron ore and are used in steel-making.
