Essar in a spot over NMDC iron ore fines

Essar Steel may have to start buying iron ore fines on spot rates from National Mineral Development Corporation (NMDC) from 2005-06 until the company starts lifting ore fines and slimes through the slurry pipeline.

This would result in the company spending about $ 65-70 a tonne on its purchases of iron ore fines, which happens to be the prevailing spot purchase rate.

This is the final recommendation of the Ganesan Committee, set up by the steel ministry to recommend changes required in the present iron ore pricing policy.

The panel wants NMDC to sign a fresh contract with the actual user as the original contract is with Essar Investment, which the panel found to be not the "actual user" in the present case.

A Essar spokesperson said the slurry pipeline has already been completed and it is in test phase.

"The contract is between the buyer and seller and, hence, it would not be appropriate to comment as of now," he said.

The committee found that Essar Steel lifted 28.9 lakh metric tonne of iron ore fines or 55.5 per cent of contracted amount in 2004-05 allotted to the company under the company's original long term agreement signed with the NMDC in 1993.

In fact, the panel found the company's overall performance of lifting iron ore fines to be below 50 per cent. "For the last 4 years, the performance was 46 per cent", noted the committee in its recommendations to the steel ministry.

The committee has also called for a "quarterly assessment" of the quantity lifted by Essar. The panel notes: "Subject to satisfactory performance and availability of iron ore fines, the quantities may be raised to above 5.2 million tonne".