Indian government to penalize miner for unused mining capacity

19 June 2017

Indian steel ministry is exploring several options, including the need for a sector regulator, penalizing miners for unused capacity, and mandatory pushing out of unsold stock to lower iron ore prices among others. The move is aimed at keeping a check on iron ore prices and making it affordable and competitive for domestic steelmakers.

An official told that “A committee comprising senior steel ministry officials is likely to come out with a policy that would bring down the price of iron ore (a key raw material in steel making process).”

The official said that “The committee will finalise the report by next month.”

The ministry has consulted key stakeholder’s comprising officials from industry associations such as Federation of Indian Mineral Industries, Indian Steel Association, Sponge Iron Manufacturers Association, NMDC and MOIL. Another official said that in the last four meetings since January, the committee has discussed need for a regulator in the sector among other issues.

The steel ministry is of the view a regulator for iron ore mining. The official said that “If you regulate iron ore prices, you will also have to regulate steel, which will ultimately be counterproductive for the sector.”

NITI Aayog had last year mooted creating independent regulators for steel and mining sectors, which would help the highly leveraged companies in the sector profitable.

The official further said that the ministry also may not want to interfere in state-owned NMDC’s pricing mechanism as it would adversely impact their commercial interests. Being the country’s largest iron ore miner, the government feels that if NMDC goes slow in raising prices, it will force private sector companies to follow suit.

The policy that the ministry will finalize, could be on increasing supply and availability of iron ore, which will eventually help lower ore prices for steel makers.

Source : moneycontrol