The Hindu Business Line : Ministry studying plan for uniform pricing of iron ore

The National Mineral Development Corporation (NMDC) exports iron ore under long-term commitments at a lower price compared to what it charges the domestic steel manufacturers.

The Ministry is also examining whether the NMDC has incurred losses because of this dual pricing policy.

The NMDC has not yet increased its ore prices for the current financial year in its annual contracts. However, informed sources said, once a decision is taken by the Ministry, the NMDC will effect a price hike.

Steel manufacturers are worried because, in the global market, some of the biggest iron ore producers such as Companhio Viledo Rio Doce of Brazil, BHP and Rio Tinto have increased their ore prices by more than 70 per cent this year.

"Normally, NMDC follows the international trend. Going by that, if NMDC decides to increase prices by 70 per cent, it would eat into the margins of the steel manufacturers because we have cut steel prices based on the current ore prices," an official in a steel manufacturing company said.

Additionally, the companies are not sure whether the NMDC would effect such a price hike with a retrospective or prospective effect on their annual supply contracts.

"If it decides to increase prices with retrospective effect, that would unleash a major bearish trend in the domestic steel sector," the official said.

The Steel Ministry had set up two committees to look into the issue of iron ore. One committee was to examine the uniform pricing of iron ore and the other committee was to examine whether the NMDC had incurred losses due to dual pricing.

"Both the committees have submitted their recommendations and these are being examined. A final decision is expected by the month-end," sources said.

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