Pellet manufacturers have asked the government to scrap export duty on the steel-making input, saying that sudden imposition of the levy has cast a shadow on Rs 25,000 crore investment made by them to enhance capacity.
Pellet Manufacturers' Association of India (PMAI) in a meeting with the commerce ministry has petitioned for removal of 5 per cent export duty, imposed in January this year, claiming that it was choking the industry and would stunt growth.
"The sudden levying of export duty of five per cent is a deterrent to exports. Hence, PMAI has requested government to remove the duty to ensure optimum capacity utilisation and see the industry does not get into a financial stress," it said.
In the 2011-12 Budget, government had pruned customs duty on capital goods required for setting up pelletisation and beneficiation plants to 2.5 per cent from 7.5 per cent earlier to encourage use of low grade iron ore, main input for pellet manufacturing.
This move, according to the industry association, led to around Rs 25,000 crore investment that resulted 39 million tonnes (MT) hike in installed capacity to 62 MT in March 2014 from 23.5 MT in 2011-12.
"Over Rs 25,000 crore have been invested in the industry. A large part of this expansion was financed by bank loans. The adhoc and sudden changes has raised a question mark on the stability of policies based on which investments have been committed," PMAI said.
Indian steel makers do not use mainly low-grade iron ore in the absence of proper technology. PMAI said since domestic demand for pellets has been lower, capacity utilisation of the industry was down leading to stress on the performance of the industry.
The Standing Committee on Coal and Steel had in February also asked the government to roll back the duty as the "increase defied logic".
