ICC urges Odisha to reduce floor price of iron ore to production cost

Industry body says while steel prices have fallen sharply, domestic ore prices have not come down correspondingly

The Indian Chamber of Commerce (ICC) has urged the Odisha government to reduce the floor price of iron ore offered through e-auction in the state to the cost of production level to improve the viability of steel industry in the state.

In a letter to the Chief Minister Naveen Patnaik, the ICC said, although steel prices have fallen drastically in India, the domestic iron ore prices have not come down correspondingly.

It said, while the cost of mining iron ore hovers below Rs 500 per tonne, the iron ore is being sold to the steel industry in the range of Rs 1000 to Rs 1850 per tonne, making their operation unviable and forcing them to operate at low capacity.

As a result the mining companies are earning huge profits while the steel industry bleeds on account of high input cost.

It may be noted, the state owned Odisha Mining Corporation reported profit of Rs 1,487 crore on sales of Rs 1881 crore in 2014-15 and profit of Rs 500 crore on sales of Rs 1,116 crore during April to November 2015-16. National Mineral Development Corporation (NMDC) also reported profit of Rs 9,787 crore on sales of Rs 12,347 crore in 2014-15 and profit of Rs 2,814 crore on sales of Rs 3,407 crore in the first half of 2015-16.

To ensure steady supply of iron ore to the steel industry, ICC has suggested increasing the iron ore production to the rated capacity of mines and selling of inventory through e-auction with cost of production as floor price.

In Odisha, the rated capacity of mines is pegged at 90 million tonne per annum, but in the current year, the annualised production rate is estimated at 50 million tonne or 55 per cent.

Similarly, out of total 128 million tonne iron ore stockpile in the country, Odisha's share is largest at 77 million tonne. The high inventory is not because of lack of demand for the ore in the country, but on account of reluctance of steel industry to buy ore at high prices.

Pointing out anomalies in the collection of royalty on iron ore in the state, ICC said, royalty is being charged on the highest grade of ore found in a mine whereas it should be charged on the grade of ore actually mined in a deposit. This is also pushing up the cost of iron ore, it added.

The industry body also pleaded for expediting auction of iron ore mines for end use industry and finalisation of roadmap for auction of non-captive mines.

ICC said, imposition of 30 per cent export tax on iron ore has encouraged value addition of iron ore within the country, but the steel makers are not taking this opportunity to step up domestic use of the ore fearing operational loss due to high input cost. It, however, urged the government to maintain the export tax on iron ore.