India sets up another committee to review iron-ore pricing

KOLKATA (miningweekly.com) – The Indian Steel Ministry will soon conduct a review of iron-ore pricing, which will include a probe of the country’s largest miner, NMDC Limited, and the e-auction processes for price discovery.

The Steel Ministry plans to set up a committee of experts to complete the pricing review.

“I want to understand the pricing mechanism of NMDC. An expert committee of the Ministry will go into the mechanisms of NMDC and the auctioning of iron-ore by the latter,” newly appointed Steel Minister Chaudhary Birender Singh said this week.

“If auction and e-auction have been widely adopted across the country, then why has NMDC adopted a manual process? NMDC officials have explained why an electronic platform has not been adopted, but the Ministry wants to find out a way forward,” he said.

This will be the second committee to study iron-ore prices, as a committee of experts was also set up under government policy think tank, the National Institution for Transforming India, or NITI Aayog. This committee has been mandated, among other things, to investigate charges that India's export prices are substantially lower than that which miners, including NMDC, charge domestic steel producers.

In its preliminary comments, the expert group of NITI Aayog maintains that the supply of critical raw materials for domestic value addition should get priority over exports of raw materials as a matter of principle, and hence mechanisms will need to be evolved to ensure that only domestic surplus iron-ore is shipped overseas and domestic prices remain competitive.

In June last year, the Indian Cabinet approved the renewal of a long-term agreement with Japan and South Korea to export 5.5-million tons a year over the next three years to March 2018.

The export contract has drawn flak from domestic steel producers without captive mines. Under long-term agreements, these miners are being charged higher prices for domestic iron-ore when global prices are falling.

While there is no information available on whether the government is considering using tariffs as disincentives for iron-ore exports, a senior Steel Ministry official has said that, “the interest of domestic steel producers needs to be protected in view of the stress faced by the industry and the issue of raw material security. Pricing will be discussed threadbare at all levels of the government and the new committee should be seen in that light”.

The possibility of checks on iron-ore exports and pricing comes at a time of a reversal in trends in outward shipments of the raw material from the country. As per government data collated from ports, iron-ore shipments through major ports during April and May 2016 were up 523% to 7.47-million tons, as compared with a 28% fall during the corresponding period of 2015.