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Stemcor closes doors on Odisha plant due to poor offtake of pellets

Stemcor, one of the largest foreign manufacturers of iron ore pellets, has shut down Odisha plant due to poor offtake of pellets domestically.

, ET Bureau|
Feb 14, 2014, 04.00 AM IST
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"We are faced with low demand in domestic market and a huge pile up of inventory. This has forced us to cut back production in the last ten days," ND Rao, managing director of Stemcor said.
"We are faced with low demand in domestic market and a huge pile up of inventory. This has forced us to cut back production in the last ten days," ND Rao, managing director of Stemcor said.

KOLKATA: Stemcor, one of the largest foreign manufacturers of iron ore pellets, has shut down its plant in Odisha due to poor offtake of pellets in the domestic market. The company's travails reflect the problems of industry which has been faced with an inventory pile up of nearly 5 mt in the last 5-6 months.

"We are faced with low demand in domestic market and a huge pile up of inventory. This has forced us to cut back production in the last ten days," ND Rao, managing director of Stemcor said.

Expressing his disappointment over the sudden government decision to impose 5% export duty on iron ore pellets on January 27, Rao said such ad-hoc decisions are likely to have a cascading effect on the overall climate for foreign direct investment (FDI) in the country. "We put in FDI of nearly Rs 2,300 crore for a 4 million tonne plant. However, we are facing difficulty in sustaining our operations due to inconsistency in policy environment, particularly with respect to iron ore pellets in the country," he added.

Recent news reports have also suggested that the export tax could have an impact on UK-based Stemcor's bid to sell its Indian assets. While potential buyers would still be interested in its mines, the export tax would make the deal less lucrative by making potential pellet exports costlier. However, Rao did not wish to comment on it, saying he was not involved in the process. The Indian pellet industry has grown to 83 mt in 2013-14 from a level of 23 mt in 2011-12, mainly due to encouragement and policy initiatives of the government. The recent move has thus disappointed the industry.

A capex of nearly Rs 35,000 crore has been incurred by the pellet industry in the last few years, with support of banks and institutions. The recent move to impose export duty on pellets would be detrimental to the iron ore pellet industry in India, the industry body Pellet Manufacturers' Association of India (PMAI) has said.

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