As per India’s foreign trade policy, trade in iron ore pellets is free as it lies outside the purview of regulation. This was the straightforward reply given by the Central government to the Supreme Court recently while responding to a couple of public interest litigations (PILs) pending in the apex court that had raised objections to duty-free pellet exports by private companies.
The PILs had alleged that private firms evaded export duty and sought the SC’s direction to the Centre to levy a duty of 30% on exports of iron ore in all forms, including pellets. The imminent need for clamping down on pellet exports, the PILs alleged, arose from the fact that they were basically disguised exports of high-grade iron ore (Fe 64-72%) in the form of pellets.
Earlier, the country’s highest court had asked the Centre to file a counter affidavit within four weeks.
Trade unregulated
The Centre told the court that pellets are not listed in either of the three regulated entities list – prohibited, restricted, or standard trading enterprises (STEs). This showed that “as per Foreign Trade Policy, trade in iron ore pellets is free, because it is not regulated”.
In its written response, the Ministry of Commerce and Industry said that “imposing export duty on a commodity or removing it is in the realm of public policy… Export duty on iron ore pellets has been imposed and removed from time to time”.
For example, a 5% export duty was imposed in Jan’14 and all exporters, including PSU producer KOICL, had to pay the duty till it was removed in Jan’16.
Govt’s prompt response
SteelMint reported earlier that a PIL had been filed by senior advocate Prashant Bhushan representing an NGO that alleged excessive mining and consequent environmental degradation resulted from high pellet exports from India – mainly to China.
“To discourage iron ore exports, imposition of 30% export duty has been provided; however, the ore has been exported in pellet form without paying the duty,” Bhushan had alleged in the court.
The other PIL, filed by advocate M.L. Sharma of Coalgate fame, alleged that certain companies be prosecuted for alleged evasion of export duty by declaring wrong tariff code to ship out iron ore and pellets under the Foreign Trade (Development and Regulation) Act, 1992.
Sharma’s PIL stated that the ministries of commerce and finance, the customs department and 61 companies had been “hand-in-glove in exporting millions of tonnes of iron ore and pellets to China” in violation of various laws by using Tariff HS Code 26011210 instead of 26011100 and evading 30% export duty. The PIL sought a penalty of over INR 7 lakh crore to be slapped on the defaulters.
In conversation with SteelMint earlier, Sharma had expressed the apprehension that delay on the part of the government in coming up with a response could drag the case indefinitely. However, the government has been forthright in its response and, therefore, a prompt resolution to the highly sensitive issue of pellet exports now looks increasingly likely.
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