Penalties for unused mining capacity, unsold stock on govt’s radar to contain iron ore prices

Shreya Nandi

Moneycontrol News

The steel ministry is exploring several options, including the need for a sector regulator, penalizing miners for unused capacity, and mandatory pushing out of unsold stock to lower iron ore prices among others.

The move is aimed at keeping a check on iron ore prices and making it affordable and competitive for domestic steelmakers.

“A committee comprising senior steel ministry officials is likely to come out with a policy that would bring down the price of iron ore (a key raw material in steel making process),” an official, who did not wish to be identified, told Moneycontrol.

“The committee will finalise the report by next month,” the official said.

The ministry has consulted key stakeholder's comprising officials from industry associations such as Federation of Indian Mineral Industries (FIMI), Indian Steel Association (ISA), Sponge Iron Manufacturers Association (SIMA), NMDC and MOIL.

In the last four meetings since January, the committee has discussed need for a regulator in the sector among other issues, another official said.

The steel ministry is of the view a regulator for iron ore mining. “If you regulate iron ore prices, you will also have to regulate steel, which will ultimately be counterproductive for the sector,” the official said.

NITI Aayog had last year mooted creating independent regulators for steel and mining sectors, which would help the highly leveraged companies in the sector profitable.

The official further said that the ministry also may not want to interfere in state-owned NMDC’s pricing mechanism as it would adversely impact their commercial interests. Being the country’s largest iron ore miner, the government feels that if NMDC goes slow in raising prices, it will force private sector companies to follow suit.

The policy that the ministry will finalise, could be on increasing supply and availability of iron ore, which will eventually help lower ore prices for steel makers.

“For instance, should there be a penalty on miners who are mining lesser than their capacity,” the official said. “Or they may have to mandatorily push out unsold iron ore fines”.

Merchant miners try pushing out more of iron ore lumps, which is generally sold at a higher price. Ore fines—mainly used by integrated steel plants—are cheaper and this may push down prices in the market for lumps as well.

The steel ministry wants to ensure that the supply side issues get sorted. Steel makers complain that it has been observed that an artificial ore scarcity is created by miner, which escalates prices.