New Delhi: The government on Monday imposed an export duty of 5% on iron ore pellets to curb exports and prevent a shortage in the domestic market.

“Considering the domestic requirement of iron ore pellets, the government has decided to impose an export duty of 5% on iron ore pellets," the finance ministry said in a statement.

At present, though iron ore fines and lumps are subject to an export duty of 30%, iron ore pellets are exempt.

Steel companies have been demanding imposition of export duty on iron ore pellets in view of rising exports. Iron ore is a critical raw material required for production of steel.

“In 2012-13, exports of iron ore pellets were negligible. However, in April-November 2013, exports of iron ore pellets have risen sharply, causing an apprehension about shortage of iron ore in the country," the statement said.

Industry body Assocham, in a letter to the finance minister last month, had pointed out that iron ore producers in India were taking advantage of zero export duty on pellets and circumventing exports of iron ore through pellets; there is hardly any value addition in conversion of iron ore fines to pellets, it said.

Though iron ore production had fallen 14% to 70 million tonnes (mt) in the first half of 2013-14 from 82 mt in the corresponding period last year, exports have surged.

Exports of iron ore increased to 5.33 mt in the second quarter of 2013-14 from 2.33 mt in the first quarter, the industry body pointed out.

The government also increased the excise duty on pan masala and tobacco products including gutka and chewing tobacco, where the duty is currently imposed under the compounded levy scheme.

Under this scheme, the duty is levied on the basis of the number of packing machines in the factory. With progress in technology, the production speed of these machines has increased, according to the central board of excise and customs, warranting an increase in excise duty per machine.