The committee set up to suggest the pricing mechanism for iron ore is likely to submit its report by the end of the current month, a source in the steel ministry said.
“We will go by the report and depending upon its recommendations, we will chalk out our future plan of action,” said the source not willing to divulge identity.
The committee, headed by the financial advisor of the steel ministry, has been mandated to find the ways and means of checking iron ore prices so that there is no profiteering by the miners. The intention is to set a price band for the raw material, if not capping the price.
While source said capping the price may not happen also, but in order to ensuring that the iron ore prices remains as competitive as possible for steel makers, government may benchmark the price, 10-12% higher than the average cost of production of the raw material. Neither FIMI nor state-run iron-ore miner NMDC has any representation in the committee.
The iron ore production witnessed significant growth in FY17. India’s iron ore production is expected to cross 190 MnT compared to 155.9 MnT in previous fiscal. Iron ore exports from India jumped fourfold amid higher global prices and was recorded at 24.35 MnT in FY17 against 6.04 MnT in previous fiscal. Imports to India remained stable in FY17.
The move, according to analysts, amounts to a throwback to the history when prices of many industrial products were regulated. Steel prices in the country are not regulated though.
As reported by SteelMint earlier, iron-ore accounts for only 10% of the cost of steel-making for SAIL and Tata Steel which have 100% captive iron-ore, while in case of others like JSW Steel and Essar steel, which buy the raw material from the open market, the cost could be around 20-25%.
It generally takes 1.6 tonne iron-ore to produce one tonne of iron. India had produced around 97 MT steel last year; however, more than half of it was through the induction furnace route, which does not require iron-ore as raw material.
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