NEW DELHI:  The FICCI - Federation of Indian Chambers of Commerce and Industry,  has urged to the Union Ministry of Finance by writing a letter seeking the withdrawal of 15 percent export duty on pig iron.

The decision to apply the export duty, according to FICCI, will not benefit the Indian steel sector but will negatively harm pig iron producers, making it unprofitable for them to export excess pig iron.

Due to fluctuations in domestic demand and in order to keep their operations afloat, merchant pig iron companies are compelled to export excess pig iron.

According to FICCI, export duty on pig iron will not lead to any benefits to the domestic steel industry as almost all major steel manufacturers have captive pig iron production. However, given the weak demand from the domestic steel sector, it will be bad for the merchant pig iron producers to sell the excess supply.

Pig iron is an intermediate product produced during the production of steel, which is obtained by smelting iron ore in a blast furnace. Compared to its installed capacity of 7 MT, India produced roughly 5.76 MT of merchant pig iron in FY22.

In its letter, FICCI urged that the domestic consumption of merchant pig iron come down drastically from 9.90 MT in FY17 to 4.94 MT in FY22. A key reason for this drastic reduction is steel scrap substitution in pig iron market, which was made duty-free in the 2021 Union Budget. Consequently, domestic pig iron producers were forced to export, in order to utilize the production capacities at breakeven operations level.

FICCI reported that "The cost of coal makes up close to 50% of the price of making pig iron. Because of the spike in coking coal prices, domestic pig iron producers are already having trouble. Due to limited domestic demand, the industry is unable to raise prices despite rising raw material costs ".

The industry association said in its statement that "at the moment, the domestic business is functioning with thin and occasionally negative margins." It asserted that because of weak domestic demand and increased export costs, the application of export duties will push the domestic pig iron industry to reduce production.

The duty will also create a situation where MSMEs and other standalone pig iron producers will not be able to access international markets.

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