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Odisha, the largest producer of iron ore in the country, is mulling canalisation of iron ore trade by appointing a designated agency in order to bring in transparency and generate more revenue.
The single-point trading process is likely to push iron ore rates and impact margins of steel makers across the country who depend on the state for the raw material supply, as many other major producers, such as Karnataka and Goa, have restricted output.
According to a proposal, the state government plans to create a single point trading platform by authorising the state-run miner Odisha Mining Corporation (OMC), which will float sales tenders on behalf of 150-odd iron ore miners. The process is expected to check under-reporting of mineral prices by some miners and thus bring in more revenue to the state exchequer in the form of royalty, sources said.
“The process (canalisation) will start from January, when OMC will act as the sole trading agency for iron ore in the state. After finalisation of tender prices, OMC will communicate the rates to the miners and then miners will carry forward the delivery process,” said a government source.
The state is the highest producer of high quality sized iron ore and fines, with annual output surpassing 75 million tonnes. In the current fiscal, it is expected that the state will produce less than 45 million tonnes ore due to production cap imposed at key mining sites.
Many sponge iron makers and other secondary steel producers of Odisha, Chhatishgarh and West Bengal depend on state-based miners to run their units. Some steel makers based in south India have also started sourcing the raw material from the state after Goa recently banned mining following a probe panel recommendation. In Karnataka, even though the Supreme Court has lifted the ban on mining after 13 months, production is yet to resume in full scale.
According to current practices, manufacturers procure raw material from miners at a negotiated price, while others depend on mines run by OMC, which announces its rates every quarter. The introduction of the tender process is expected to push iron ore rates, traders said.
“Yes , it is certain that iron ore rates will go up because of the tender process. But it will, at least, ensure raw material supply to the steel makers,” said P L Kandoi, president of All Odisha Steel Federation.
After initiating the e-auction process for chrome ore raised in its own mines, OMC is in the process of introducing the same system for iron ore raised from its own mines.
Currently, central government PSU National Mineral Development Corporation (NMDC) conducts e-auction of iron ore in Karnataka following the Supreme Court direction.
The government of Odisha has been taking pro-active measures to curb iron ore exports in order to ensure raw material supply for over 45 companies, including steel majors Posco and ArcelorMittal, with whom it has signed agreements to set up steel plants. In a recent notification, it has announced not to renew mining leases for those who do not have any mineral development industry under their ownership and said industries having mining areas beyond their captive use must return the surplus land to OMC.