While steel secretary Aruna Sharma hinted at regulating iron-ore prices that “move like the Sensex” speaking to a TV channel, the producers of this key raw material for steel-makers have denounced the move as “bogus and foolish.” Given that miners lay hands on iron-ore reserves by bidding for them and assuming market-determined pricing, it would be grossly unfair for the government to cap profits, they said.
Iron-ore accounts for 10% of the cost of steel-making for SAIL and Tata Steel which have 100% captive iron-ore, while in case of others which buy this raw material, the cost could be 20-25%.
“There needs to be some sharing of the profits (by iron-ore producers). We are working on the end-formula, and maybe we will come up with the logic very soon,” Sharma told the channel, against the backdrop of the fear that robust import demand from China will further jack up domestic iron-ore prices, which rose to their highest since August 2014 last month.
What the government might have in mind is not exactly capping the price of the raw material, but imposing a ceiling on profit margins somewhere between 30-40%, industry sources surmised. Yet it could amount to a throwback to history, when prices of many industrial goods were regulated, they said, adding that the idea was objectionable. “Mines are auctioned in India, unlike most other major natural resources-rich nations,” Federation of Indian Mineral Industries (FIMI) secretary general RK Sharma told FE.
Source – Financial Express
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