India to ensure higher iron-ore availability for domestic steel producers

KOLKATA (miningweekly.com) – The Indian government is planning several measures to alleviate raw material supply issues experienced by steel producers, including stepping up iron-ore mine auctions, earmarking a portion of domestic iron-ore production for local steel mills and reforming the ‘inverted import duty’ structure.

India’s Mines Ministry is proactively pushing provinces to increase the number of iron-ore blocks up for auction and to ensure higher volumes of raw material availability to domestic steel producers.

As an initial response, Odisha, which last year concluded three iron-ore block auctions, will put two iron-ore blocks up for auction. The province has completed preliminary work to auction the Netrabandhapahad and Kalmang mines. The differential global positioning system of survey, as mandated by the central Mines Ministry, was completed last week and the formal notification for conducting the auction will be issued in the next month.

Details of iron-ore reserves of these two blocks and other geological details were not available. A Mines Ministry official said that geological details and mappings would be made available only after notification of the auction was issued.

At the same time, the government is working on a policy framework that will ensure availability of iron-ore to steel producers, particularly for medium and small-scale ones, to shelter them from the current volatility in raw material prices.

According to the official, the Mines Ministry has set up an expert committee to frame the scheme, which will be announced within the next month.

While it was not yet clear whether a portion of iron-ore production would be reserved for domestic consumption, the official said that the aim would be to ensure that incremental production was being used for domestic value addition rather than being exported.

The National Institute for Transformation of India Commission, a government policy advisory body, last year prepared a background paper on iron-ore, which advocates for higher domestic value addition of raw material and calls for less exports to promote local steel production. The new iron-ore scheme would be in line with such an objective, the official added.

In yet another move, the Mines Ministry, through the national 2017/18 Budget scheduled for Parliament on February 1, will seek to reform the inverted import duty structure on raw materials.

This reform will seek to reverse the existing anomalous import tariff, wherein import duties on raw materials are higher than those applicable for finished products. The steel industry believes the structure increases the cost of domestic value addition, while making imports of finished products cheaper.

For example, it is expected that the national Budget will reduce the import duty on critical steelmaking raw materials, like coking coal and metallurgical coke to nil from 2.5% and 5% respectively, as Indian steel producers are heavily import dependent for these inputs.

At the same time, in the case of finished products, the import duty on finished stainless steel is likely to be hiked to 15%, from 7.5% at present.