India’s central government is planning to replace the decades-old monthly sales price index of iron ore prices published by the Indian Bureau of Mines (IBM) with a National Mineral Index that would tap a wider pool of prices.
IBM’s average monthly sales price is critical in calculating mines’ royalty and contribution to DMF and NMET. These average prices were also used as a basis for setting the premium for mines at the recently-held Odisha iron ore auctions. The National Mineral Index could replace the current monthly average prices for payment of these premiums and contributions.
The Federation of Indian Mineral Industries (FIMI) has criticized the proposal of including prices of captive transactions in determining average monthly prices, diverging from the current method of including only iron ore prices of merchant mines. FIMI said the current system of including transactions of only merchant mines leads to a more efficient price discovery.
Captive producers could keep prices artificially low and distort market prices, said FIMI.
An amendment to the mining law, MMDR Act, may be brought in soon to replace the average sales price of IBM with the National Mineral Index, a JSW Steel executive said at a recent analyst conference. This move will be an “interesting” one for the industry, said the executive, but did not elaborate.
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