The Odisha government has deferred taking a decision on supply of iron ore to steel companies on long-term contract basis after an inconclusive meeting with the officials of Odisha Mining Corporation (OMC).
“The state government needs some time to observe the demand-supply situation and hence the Chief Secretary said another meeting will be held to take the decision,” said a top OMC official without mentioning a definite time period for the meeting.
Chief Secretary B K Patnaik had called a meeting with OMC officials on Monday, after canceling it two weeks ago due to Italian hostage crisis, to discuss about supplying iron ore to steel companies by OMC on long term basis.
Currently the state-run miner sells iron ore to steel units at a price decided though an auction conducted every quarter with a priority to companies with whom the state has signed Memorandum of Understanding (MoU).
Raw material supply is key to Odisha's ambition to become the largest steel producer of the country with highest deposits of iron ore as it has signed MoU with 45 producers.
Out of 45 companies who signed the MoU, only 20 steel companies have started production in the state at a fraction of their desired capacity due to lower availability of key raw material. In last two years, iron ore supplies have dried up after the state government took a pro-active step to stop illegal mining, by suspending mineral extraction in over 100 iron ore mines, half of total operating mines.
Since then, the companies were procuring iron ore from OMC through a quarterly auction process. But many steel companies later started complaining about the auction process, saying that the bigger companies often bid higher to artificially increase the price of the raw material and thus, deprive the smaller plants to buy.
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Hence, the state government had planned to enter into long-term supply agreement with the steel producers through OMC. Trade sources said the state government was dragging its feet over the matter due to dwindling iron ore production by OMC, whose mines are also in dock for violation of environmental laws.
In its April-June quarterly price chart, OMC did not display prices for Barbil and Gandhamardan sector, which account for significant share of total iron ore output of OMC, even though it raised prices of iron ore in other sectors by Rs 350 per tonne due to lower supply. The state government has almost stopped leasing out mines to private companies after it entered into legal battle for awarding an iron ore mine to Posco, which is yet to take possession of the land for its mega project. It has even faced opposition for reserving certain mines in favour of the OMC.