New Delhi: Mines minister Dinsha Patel has asked finance minister P. Chidambaram to withdraw the recently levied 5% export duty on iron ore pellets following representation from the industry.

Before him, commerce secretary Rajeev Kher and parliamentary standing committee on coal and steel had also recommended to roll back the export duty that was imposed on 27 January.

“I shall be grateful if the petition of PMAI (Pellet Manufacturers’ Association of India) receives your personal attention and 5% export duty on iron ore pellets is withdrawn at the earliest, which will go a long way in protecting the interest of the industry," Patel said in his letter written on Wednesday to Chidambaram.

The mines minister wrote to the finance minister after receiving a representation from the PMAI. It had expressed apprehension that about 35,000 crore investments would become non-performing assets due to the export duty as domestic demand is too low and most of the manufacturers are running at less than 50% capacity due to lower demand.

The PMAI had also said the investments were made by the industry following government policy measures of 2011-2012 to promote manufacturing of iron ore pellets. However, continuation of the export duty on pellets would lead to gradual closure of the units and thereby, impacting livelihood of 80,000 people employed directly or indirectly by the industry.

Besides, Railways and ports will lose substantial revenues and Kudremukh Iron Ore Company Limited (KIOCL), a PSU primarily into pellet production, would also get adversely affected due to the export duty, it said.

The mines ministry was not consulted by the finance ministry when the duty was imposed on 27 January on the basis that in the form of pellets, iron ore was being exported without paying duties. Export of raw iron ore or fines and lumps already attract an export duty of 30%.

Pellets are basically the 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 tonne (MT) and has risen manifold since 2010-11 as government then encouraged value addition of iron ore fines. The PMAI had earlier said that of the total pellet production, current exports is over 1 MT only and accounts for 1.2% of the installed capacity.