Reeling under the impact of steep hike in prices of iron ore, steel industries operating in the Kalinga Nagar Industrial Complex (KNIC), the emerging steel hub in Orissa's Jajpur district, have urged the Orissa Mining Corporation (OMC) to fix base price of iron ore on long-term basis.The Kalinga Nagar Industries Association (KNIA), the representative body of the industries operating in the area, has suggested that OMC can supply 50 per cent of the ore to these industries at this fixed price and offer the balance through the e-auction mode.
OMC can work out a base price of the ore after adding margins to the production cost, it said.
“Non serious players are manipulating the iron ore price in the open tender adopted by OMC as a result of which, iron ore prices have risen to abnormal level making units unviable. The state government should put restriction on iron ore supplies to players outside the state and sell only 25 per cent of their production to units located outside the state and offer 75 per cent to units within the state”, said P L Kandoi, president of KNIC.
He stated that the prices of iron ore in the Gandhamardhan sector have surged by 191 per cent while in the Daitari sector, there has been an upswing of 130 per cent in ore prices in the past 12 months.The price of iron ore (size 10-40 mm) of OMC for the third quarter of 2010-11, from Gandhamardan is fixed at Rs 4155 per tonne and from Daitari, at Rs 4455 per tonne. The prices of ore from these two mines for the same period of 2009-10, were Rs 1426 per tonne and Rs 1944 per tonne respectively.
Presently, the prices of iron ore are revised by OMC once in a quarter. The Price revision is done through tendering system, taking into account the prices of the ore in the domestic and international markets.While the ore prices have shot up, the prices of intermediate products like Pig Iron, Sponge Iron and finished steel remained either flat or have dipped.
The rate of iron ore historically is about six per cent of the price of long products of steel, 12 per cent of pig iron and 16 per cent of sponge iron. This trend has been true over the past decade with which the related industries were somehow surviving.
However, the unprecedented rise in the price of iron ore in the third quarter of 2010-11 has changed the entire dynamics of cost of production as the rate of iron ore has changed from the previous levels to 12 per of the price of long steel products, 20 per cent of pig iron and 30 per cent of sponge iron.
“If this situation is allowed to continue, all the units in the Kalinga Nagar area shall have no other option but to shut down the entire operation which eventually will lead to retrenchment of thousands of workers, stunting peripheral development. This unavoidable closure will have cascading impact on the economic growth of the region in particular and the State in general”, said Kandoi.
