Steel ministry moots separate iron ore auctions to curb profiteering
The steel ministry has suggested the holding of separate auctions of iron ore for end users and the mercantile category on the lines of e-auctions for coal supplies.
The idea to strike a difference between profit and profiteering through a formula that incorporates cost of ore plus a certain percentage of profit.
“What we in the ministry are trying to do is to distinguish between profit and profiteering. If you can think of some policy to have separate bids (for iron ore) for end use and the mercantile category...here we need the support of the state government. Even with National Mineral Development Corporation, which is a leading producer of iron ore, we are doing our homework,” said Aruna Sharma, steel secretary, in an interactive session hosted by the Indian Chamber of Commerce (ICC). Sharma cited the example of coal where separate auctions for sponge iron and the power sectors had helped ease prices.
She pointed out that the cost differential between a steel producer with captive mines and another without them worked to around ~2,000 per tonne. “That is a very big difference that can question the viability of a steel plant,” she added.
“Moreover, when steel prices go up, mercantile iron ore prices are also hiked. I have been observing this for the last one year. Whatever benefit the steel plant can get in the process is lost and we become non-competitive,” Sharma said.
India’s steel manufacturing cost within the plant was the second best in the world but steep input costs were making it uncompetitive, she said.
She ruled out the need to amend the MMDR Act to rein in iron ore prices. “Iron ore pricing is on the top of our agenda. But pricing will depend on the mechanism of a floor price. It has nothing to do with an amendment in the law,” Sharma said.
Coking coal is another key ingredient where the steel industry is dependent on imports. “We are working on washeries and our aim is to replace 25 per cent of imported coking coal with domestic washed coal. High power cost is also a disadvantage. For reducing power cost, we are working with NTPC so that the steel industry can be treated as a separate entity like the railways,” Sharma said.
“With anti-dumping duty, we have been able to provide some protection to the steel industry and we hope that this will stabilise steel prices,” she said but warned that steel prices could not be exploitative given their implications on end applications. Expressing concern over credit flow to the steel industry, Sharma said the ministry was working with the finance ministry and banks for reviving credit. “The steel sector was contributing 28 per cent to non-performing assets and all lending happened through a consortium of banks. The first thing to do was to come out of it. The question is whether Indian bankers can offer credit to the steel industry and at one per cent below the market rate,” said she.
For creation of 100 million tonnes of new steel capacity, ~10 lakh crore investment will be needed. The national steel policy envisages reaching a capacity of 300 million tonnes by 2030-31.