Steel, sponge iron and pig iron manufacturers and industry bodies in Karnataka are exploring legal recourse against standalone, private miners in the state after iron ore prices under the e-auction route jumped by over 100% in the last one month.
In a set of letters written by industry bodies in Karnataka on January 31 to three different ministries — mines, steel and environment — the private miners have been accused of cartelisation to fix and sell iron ore under the e-auction route at prices much higher than the base price of NMDC, the benchmark for fixing iron ore prices in India.
Since the private miners in the state are free to fix prices, they are taking undue advantage of the abnormal demand-supply mismatch, forcing the consuming companies to pay “unfair premium”, they said.
As a result, while prices had been going up in the state as against the rest of the country since the last four months, in January they went up by over 100%.
In fact, sources said, if this situation continues, the iron ore-consuming firms would resort to legal action against the miners.
In one of the letters, the Karnataka Iron and Steel Manufacturers’ Association (KISMA) said the base prices of 61% Fe Iron Ore Fines has been between Rs 2,000 to Rs 2,220 a tonne since March 2013 till date for NMDC, whereas the base prices by private mining companies were in range of Rs 2,250 to Rs 2,475 till September 2013, and have been increased to Rs 5,000 a tonne in January by making a cartel to take advantage of the shortage of iron ore.
The bidder has to bid over and above base price and is liable to pay 10% royalty and 12% Forest Development Tax (FDT) in addition unlike every other place in country where it is borne by mining companies. Fe grades in iron ore classification indicates the quality of ore available from a particular mine.
An Fe grade of 60% and above is generally considered to be of good quality and below 60% of Fe grade or content is said to be of poor quality.
Lower the grade, the poorer is the iron ore quality and requires more investments in beneficiation or blending to bring it to a higher quality.
According to the December e-auction data available with the state, for the round of e-auction held on December 13, the