In the wake of the recent legal controversy surrounding exports of iron ore pellets by private manufacturers, especially after a PIL was filed in the Supreme Court by advocate M.L. Sharma of ‘Coalgate’ fame, the Department of Commerce under the Ministry of Commerce & Industry issued a clarification on 8th Oct’20 to the effect that duty-free pellet exports were going on even before 2014 and that export policy restriction put in place in 1998 was only for KIOCL.
“On 21.01.1998… a specific entry was added in the export policy regarding ‘Iron Ore pellets manufactured by Kudremukh Iron Ore Company Limited (KIOCL) out of concentrates produced by it’. Thus, the export policy was with regard to only Iron Ore pellets manufactured by KIOCL, which was ‘canalized’ through KIOCL, a CPSU under the Ministry of Steel,” the note, posted by the government’s Press Information Bureau, reads.
A notification issued on 26thSept’14 altered the export policy of pellets manufactured by KIOCL to ‘free’ from ‘canalised’, the note stated, adding that “there has been no amendment to the export policy of Iron Ore Pellets not manufactured by KIOCL”.
During the 2011-12 General Budget then Finance Minister Pranab Mukherjee reduced the export duty on pellets to nil as pellets are exported in a value-added form and therefore encourages the value addition of iron ore fines.
Items not specifically mentioned in the export schedule are “free” for exports, the note states and, as per exports data, pellet exports were taking place even prior to the change in export duty in 2011-12.
However, the legal opinion of the Deputy Legal Advisor, Department of Legal Affairs, has not been endorsed by senior officials of the Department and cannot be taken as the official legal view on the matter. “The matter for final legal position is under consideration,” the note reads.
Alternative Legal Take
It is significant to mention in this context that the legal opinion of former Chief Justice of India Ranjan Gogoi – sought by India-based sponge iron manufacturers and forwarded to the legal luminary by senior advocates of a prestigious law firm – differs with the Ministry’s understanding on the matter.
In his reply, Gogoi explicitly states that a combined reading of the Foreign Trade Policy (FTP) 2009-2014 and 2015-2020 – along with the 2014 notification – leads to the conclusion that pellet exports are only permissible in case the manufacturer is KIOCL. After the 2014 notification, any other entity authorized by KIOCL also has the legal right to export pellets.
In order to “buttress” his conclusion, the former CJI states that the Draft Export Policy 2019 (which is yet to come into force) seeks to make iron ore pellets exports totally “free” by removing the restrictive reference to KIOCL.
“If exports were totally free under the extant or earlier regimes,” Gogoi writes, “there would have been no need to omit reference to KIOCL from the Draft Export Policy 2019.”
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