Mines ministry rejects steel ministry proposal on iron ore prices

19 June 2017

The steel ministry’s proposal for fixation of iron ore prices has been categorically rejected by mines ministry, saying that the steel-making raw material is abundantly available in the country and price regulation would be tantamount to a throwback to the pre-liberalisation era.

“Mines ministry does not have a plan of fixation for iron ore prices. They (mines ministry) are the administrative ministry,” mines secretary Arun Kumar said, adding that there is no shortage of iron ore and at present there is no thinking in the mines ministry of capping of iron ore prices. Sources said the mines ministry has already communicated its view to the steel ministry that there was no necessity at this time to control price of iron ore. “There is no need to fix the price of iron ore. It is a free market. It is not a regulated market. We cannot go back to the pre 1990-1991 era,” they said. Addressing media to highlight the performance of his ministries, minister of state for power, coal, new and renewable energy and mines Piyush Goyal said, “It’s an open market. Our approach in this whole thing is that we want to expand the iron ore production and that itself will take care of market dynamics.”

At the directive of the NITI Aayog, a committee has been set up, under the chairmanship of the additional secretary in the ministry of steel, to look at an ore pricing formula for iron ore to ensure that the miners do not indulge in profiteering and the raw material does not comes at too high a price to the steel makers. It has representatives from ministries of coal and mine, but none from the miners’ association, FIMI, nor from the state-run iron-ore miner NMDC. The idea of reining in iron-ore prices stemmed from steel-makers’ continuous tirade against “arbitrary pricing” by state-run NMDC, which private miners mostly follow. They also alleged shortage in iron-ore supply. It was also intended to stop “Sensex-like” movement of the raw material that is detrimental to the interest of the steel producers. “Iron ore production is growing by 22% while steel is growing by 8%. So where is the shortage? In the last two-three years we have gone up from 129 MT to 156 MT to 192 MT last fiscal,” Kumar said.

It takes 1.6 tonne iron-ore to produce one tonne of iron. India produced around 97 MT of steel last year; however, more than half of it was through the induction furnace route, which does not require iron-ore as raw material. Iron-ore accounts for 10% of the cost of steel-making for SAIL and Tata Steel which have 100% captive iron-ore, while for others which buy this raw material, the cost could be 20-25%.

Spurce – financialexpress