The apex industry body, Associated Chamber of Commerce and Industry of India (Assocham) has urged the Centre to impose 30 per cent export duty on iron ore pellets with immediate effect to discourage circumvention of export duty and increase the raw material availability for domestic steel industry.

"The iron ore production in India has plummeted significantly by 14 per cent to 70 million tonnes (mt) in the first half (H1) of 2013-14 from the level of 82 mt in the corresponding period last year”, Assocham wrote to the Union finance minister, P Chidambaram.

On the other hand, the exports of iron ore surged by a whopping 129 per cent to 5.33 mt in the second quarter (Q2) of the ongoing financial year 2013-14 from 2.33 mt in the first quarter (Q1).

The industry body complained that while the domestic iron and steel industry is facing severe shortage of iron ore and is operating at low capacities, the exporters of iron ore are registering a triple digit growth on sequential quarter basis.

"The growth in exports of iron ore is being achieved due to massive difference in exports duty of pellets and iron ore as there is 30 per cent duty on iron ore lump and fines whereas pellet exports do not attract any duty,” it added.

The iron ore producers in the country are taking the advantage of zero export duty on pellets and circumventing export duty on iron ore through pellets, more so as there is hardly any value addition in conversion of iron ore fines to pellets. The crude steel production in India has grown by three per cent in the first half of 2013-14 as against the same period of 2012-13.

There has been a continuous growth in demand for steel in India and to fulfil the same, there has been upsurge in imports of steel and its related commodity like scrap, direct reduced iron (DRI) and pellets. About $3.5 billion of precious foreign exchange have already been spent on imports of commodities like steel, scrap, sponge iron and iron ore pellets in the H1 of the current financial year.

Assocham appealed to the government to take immediate action to restrict export of iron ore pellets from the country which is bleeding the economy.

Even Indian Railways considers pellet export as indirect way of exporting iron ore as it considers export of iron ore and pellets in same category and imposes railway freight in case of export of pellets.