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INDIRECT TAXES
Duty exemption to help KIOCL double export of pellets
Mon, 07 Mar 2011 00:36:13 +0530
To increase exports to 2 million tonnes

Close on the heels of the Budget announcement of exemption of export duty on iron ore pellets, state-run KIOCL Limited, a 100 per cent export-oriented unit under the ministry of Steel, plans to double the level of its pellet exports to 2 million metric tonnes during 2011-12. The company is likely to close the current fiscal with an export of one million tonnes to its principal market, China, a top company official said.
“The move to exempt pellets from 15 per cent export duty was long overdue. The finance minister has recognized the value addition in making pellets. This will help increase productivity of our steel plants because use of pellets help increase the oxidation in the process of steel making process. The removal of export duty will also help in converting iron ore fines into pellets,” said K Ranganath, chairman and managing director, KIOCL.

He said the company, which is likely to produce 2.2 million tonnes of pellets at its Mangalore plant this year, was looking at increasing the pellet production by 36 per cent to 3 million tonnes. Of this, around 2 million tonnes will be exported to China and the balance will be sold to domestic steel mills. In the domestic market, KIOCL sells pellets to Ispat Industries.

“We have an annual capacity to produce 3.5 million tonnes of pellets at our Mangalore plant. Currently, we are under utilising our capacity due to the absence of captive iron ore mine. The Budget announcement will help us increase our production and exports. Also, the prevailing prices for pellets at $172 (Rs 7,750) per tonne in the international market are remunerative for us to export more,” Ranganath told Business Standard.

KIOCL trades in the spot market and has no long-term export contract with its customers due to lack of captive iron ore mine. The company had to close down mining operations at Kudremukh in Chikmagalur district from January 1, 2006 following a Supreme Court order on environmental grounds.

Ranganath said the exemption from export duty would help the company save Rs 10 crore to Rs 12 crore on its current level of exports. Next year, it would be able to double its savings as it is looking at doubling its pellet exports. “We are a 100 per cent export oriented unit and we can export our entire production,” he said.

KIOCL, which reported a net loss of Rs 177 crore on a turnover of Rs 993 crore for the first time during the fiscal 2009-10, is looking at a net profit of Rs 80 crore during the current fiscal ending March 2011. It also hopes to double its net profits to over Rs 150 crore next fiscal, Ranganath added.
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