NMDC royalty irks Chhattisgarh sponge iron manufacturers

Sponge iron manufacturers in Chhattisgarh have threatened to stop purchasing iron-ore from mining giant National Mineral Development Corporation (NMDC) if it imposes royalty on the sale and not on the production of steel making raw material.

The Union Government had recently imposed 10 per cent ad valorem royalty on the "selling price" of mined iron ore. With the new royalty structure, mineral-bearing states would pocket a good share on high quality iron ore. But the steel manufacturers feel they will be the biggest loser.

"We are demanding that the royalty be imposed on the production of iron ore and not on sale, and if it did not happen so, the steel manufacturers in Chhattisgarh will stop purchasing raw material from NMDC and private miners," Chhattisgarh Sponge Iron Manufacturers Association President Anil Nachrani told Business Standard.

The decision to this effect was taken at an emergency meeting of the association today. Besides NMDC, the local steel manufacturers are purchasing iron ore from private miners of Orissa. From the government-owned NMDC, India's single largest iron ore producer, the steel makers in the state are purchasing 3 million tonnes of iron ore per annum.

According to Nachrani, the steel industry in India is already reeling under high costs of raw material, input, logistics costs and adverse market conditions. It is in no position to even think of taking the burden of increased royalty.

The sale price of Iron ore in India is at present varying between Rs 2500-3500 per tonne. The cost for mining per tonne of iron ore comes to be around Rs 500 per cent. "The royalty is imposed on the mines and same must be borne squarely by them and absorbed in their costs," he added.

In May 2008, the Union government had imposed export duty on iron ore fines export. But the mines did not claim extra from Chinese buyers as it had nothing to do with them. Same way the royalty has nothing to do with the buyers of ore in India, he added.

The steel manufacturers said that following the royalty on the "selling price" of mined iron ore, they would have to bear an additional burden of Rs 200 for a tonne of raw material. The steel price may be up by Rs 1000 per tonne till the finished products reach to the general public for consumption.