Steel makers demand change in OMC iron ore auction model

Frustrated with higher mineral rates amid weak demand for finished steel products, semi-finished steel companies and sponge makers have demanded that the state-run Odisha Mining Corporation (OMC) must change its auction model to bring prices down to realistic level.

Even as iron ore rates have declined in local markets by as high as 21 per cent since April, the adoption of new model must bring down the cost further, they argued. As per the current practices, OMC decides iron ore rates by auctioning a fraction of the total saleable quantity every quarter and declares the benchmark rate for the period after arriving at average price.

Steel makers complained that due to low quantity put up for auction, bidders quote higher rates and the same rate is fixed for entire quarter. “Once the price is fixed for the quarter, private miners enjoy by selling their material at Rs 200-300 less per tonne than OMC rates. This results in poor or marginal dispatches for OMC minerals,” said M C Aggarwal, chairman-cum-managing director of SMC Power Generation, in a letter addressed to the Chief Secretary.

The New Delhi-based company has a 250,000 tonne per annum steel plant in Jharsuguda. To support its argument, Aggarwal cited that during April-June quarter, OMC had put up 715,000 tonne iron ore for sale in Koira region. However, since prices were high because of low quantity offered in auction, only 210,000 tonnes of ore was lifted by steel makers while the remaining 505,000 tonnes ore remained unsold, making a notional loss of Rs 240 crore to the state exchequer.

“If the tendering system is corrected, then OMC might have been able to sell the entire quantity and could have earned an additional profit of Rs 240 crore. We are confident, by adopting this procedure, the iron ore prices will come down to the realistic level as compared to the prices of finished product,” said SMC CMD in his letter.