19 June 2017

The Union steel ministry has suggested holding separate auctions of iron ore for end user and mercantile categories, on the lines of disparate e-auctions for coal supplies. The idea is to strike a difference between profit and profiteering through a formula that incorporates the cost of ore plus a certain percentage of profit.

“What we in the ministry are trying to work is to distinguish between profit and profiteering. If you can think of some policy to have separate bids (for iron ore) for end use and the mercantile category… Here we need the support of the state government. Even with NMDC (National Mineral Development Corporation) which is a leading producer of iron ore, we are doing homework,” said Aruna Sharma, Union steel secretary in an interactive session hosted by the Indian Chamber of Commerce (ICC).

Sharma cited the example of success in coal where separate auctions for sponge iron and power sectors have helped ease prices.

She pointed out that the cost differential between a steel producer with captive mines and another without it comes to around Rs 2000 per tonne. “That is a very big difference which can question the entire viability of a steel plant”.

“Moreover, when steel prices go up, the mercantile iron ore prices are also hiked. I have been observing this for the last one year. Whatever benefit the steel plant can get in the process is lost and we become non-competitive”, she added

Indian steel manufacturing cost within the plant is the second best in the world but steep input costs were making it uncompetitive, she rued.

She ruled out the need to amend the MMDR Act to rein in iron ore prices. “Iron ore pricing is on the top of our agenda. But, pricing would depend on the mechanism of floor price. It has nothing to do with amendment.”

Coking coal is another key steel-making ingredient where the domestic steel industry was dependent on imports. “We are working on washeries and our aim is to replace 25 per cent of imported coking coal with domestic washed coal. High power cost is also working as a disadvantage. For reducing power cost, we are working with NTPC so that the steel industry can be treated as a separate entity like the Railways”, Sharma said.

With anti-dumping duty, we have been able to give some protection to the steel industry and we hope that this will stabilise steel prices, she said but warned that even steel prices cannot be exploitative given their implications on end applications.

Expressing concern over credit flow to the steel industry, Sharma said the ministry was working with the finance ministry and banks for reviving credit. “Steel sector was contributing 28 per cent to the NPAs (non-performing assets) and all lending happened through a consortium of banks. The first thing to do was to come out of it. The question is whether the Indian bankers can offer credit to the steel industry and at a rate which is one per cent below the market price,” she said.

For creation of 100 million tonnes of new steel capacities, Rs 10 lakh crore investments were needed. The National Steel Policy envisages reaching steel production capacity of 300 million tonnes by 2030-31.

The steel ministry’s focus is also on boosting consumption. It has targeted to enhance per capita steel consumption to 150 kg from 64 kg now. “It took us seven years to step up per capita steel consumption from 50 kg to 60 kg but we are going to reach the level of 70 kg in three years. There are opportunities in both urban and rural consumption. The industry should interact with structural engineers and contractors. With steel, up to 45 per cent cost can be recovered 30 years down the line”, said the steel secretary.

Source-business-standard