KOLKATA (miningweekly.com) - Indian iron-ore pellet exporters have been dealt a blow by Indian Railways, with the service provider turning down a proposal for lower railway freight rates than those charged for iron-ore fines transportation.

The government-owned and -managed Indian Railways clarified in a statement that it was not possible to have dual freight rates.

Indian Railways did, however, charge a distance-based freight rate for export-bound iron-ore fines that was lower than freight rates for domestic consumption.

The Commerce Ministry, in response to a submission made by iron-ore pellet manufacturers, had proposed that since pellets were a value-added product, freight rates applicable should be lower than that for transporting iron-ore fines.

However, in reply to the Commerce Ministry, Indian Railways said that both pellets and iron-ore fines had the same end-use, maintaining that two rates for the same product exported would not be justifiable.

The railway authority were also wary of adopting dual freight rates for the same commodity as it had borne the brunt of the ire of the national auditors for having lost revenues estimated at $700-million between 2008 to 2012 for the transport of iron-ore fines.

The auditors claimed that several iron-ore miners were afforded lower freight rates on account of them wrongfully declaring export-bound iron-ore fines consignments as for domestic use, by willfully providing wrong documents. Criminal investigations had been launched against companies availing lower freight rates through wrong declarations.

The railway’s decision to persist with higher freight rates has come as a fresh blow to the pellet manufacturers after the Indian government levied a 5% tax on the export of iron-ore pellets in January 2014.

According to the Indian Pellet Manufacturers Association, five large pellet manufacturers had shut down operations since the imposition of the export tax and no overseas export shipments were made between February and March, as the crash in global prices of iron-ore and the export levy had made pelletisation for exports unviable.