Strong differences have emerged between state-run miner NMDC and trading major MMTC over long-term supply pact of iron ore to Japanese mills, with the former opposing the idea fearing lower realisations and the latter pitching for it.
The long term agreement (LTA) of the country’s largest iron ore miner NMDC with Japanese steel mills for supply of iron ore, canalised through MMTC, ends on March 31 this year.
“Strong differences have surfaced between NMDC and MMTC over renewal of LTA with Japanese mills. While NMDC is opposed to it in the wake of high freight charges and possible duty hike, MMTC which gets 2.8 per cent commission for supply, is pitching for it,” a steel ministry official said.
The agreement is due for renewal from April 1 this year. Sources said MMTC, citing long-standing relation between India and Japan, in a letter to steel ministry has argued for renewal of LTA and said that a new benchmark pricing mechanism was followed by it on the pattern of suppliers from Australia and Brazil.
According to sources, it said the new pricing mechanism had resulted in over 94 per cent increase in prices of iron ore from April-June quarter onwards last year even as spot prices nosedived in China and added that under the circumstances, supply pact should be renewed for five years.
When contacted, MMTC Chairman H S Man refused to comment on differences between the state-run companies and said negotiations were on with Japanese firms for renewal of LTA. Sources in the steel ministry, which is the administrative controller of NMDC, however, added that the ministry is against the idea of renewal of long term pact in the wake of ever shrinking realisation from sale proceeds for the iron ore miner after sharing by railways, state governments, MMTC etc. Sources in NMDC said while the railways charged Rs 800 a tonne for domestic movement of iron ore, it charged Rs 1,980 a tonne for exports shrinking the margin for the Navaratna PSU.
Moreover, the PSU is fearing indictment by CAG saying how could it, in national interest, allow such exports when realisation was low.
NMDC Chairman Rana Som, when contacted, said, “The issue is under examination in the steel ministry and we have already furnished relevant information to it.”
NMDC exports 3-4 million tonnes per annum (mtpa) of ore to Japanese mills under LTAs. At present, the Navaratna firm produces about 30 mtpa of iron ore from three fully mechanised mines in Chhattisgarh and Karnataka.
