The steel ministry has advocated the conduct of separate e-auctions for offering of iron ore to end users and mercantile category. If implemented, this system can bring pricing relief for the end use projects, especially the steel plants.
Union steel secretary Aruna Sharma solicited the support of the Odisha government to work out a policy for holding separate auctions for the two categories. She said the system of holding separate auctions has worked in case of coal and expressed hope that it will also help cool iron ore prices. A similar exercise was also in the works for state run National Mineral Development Corporation (NMDC), the leading iron ore producer.
Stating that iron ore pricing was on the top of the ministry, Sharma said the mechanism of auction pricing would depend on the floor price. If a formula can be worked out where price is pegged at cost plus a certain percentage of profit, it can help check profiteering by the miners. At the steel ministry, we are working on ways to differentiate between profit and profiteering and state governments need to do the same, the steel secretary said at an interactive session organized in Bhubaneswar by the Indian Chamber of Commerce (ICC).
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.
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 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 stabilize 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 investment was 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.
Leave a Reply