Steel units upset with OMC

State-run iron ore producer Orissa Mining Corporation (OMC) has been accused of changing tender prices adversely affecting prospects of the iron and steel industry in Orissa.

Forty iron and steel companies based in Barbil, Gandhamardhan, Koira and Daitari regions have placed the details of alleged ‘illegal’ tender and re-tender bids carried out by OMC before the state vigilance and investigating authorities.

OMC managing director Santosh Sarangi defended the tendering and re-tendering process, saying, “It is true we resort to such practices at times, but it is only a new price discovery mechanism keeping in tandem with market needs.”

The companies accused OMC of fixing and finalising iron ore prices on the high side when the market was good and then suddenly cancelling the same tenders and fixing arbitrary prices not in line with the market.

They alleged that during third quarter of 2008-09, OMC tendered prices in the range of Rs 1000-Rs 1700 per tonne while the mining cost was Rs 400/ton.

Pig iron prices at that time dropped from Rs 32,000/t to Rs 20,000/t and sponge iron from Rs 24,000/t to Rs 12,000/t.

During this period, iron ore prices should have been tendered well below Rs 1000/t in response to market trends.

OMC, by its tender dated September 27, 2008, invited bids for prospective buyers and 40 parties including iron, steel and crushing units filed bids.

The bidders did not procure material at tendered prices due to falling steel price and so OMC refloated a fresh tender on November 11 2008, fixing prices by itself.

OMC was yet to acknowledge the re-tendered price, depriving buyers from procuring the material.

Allegations like OMC not rationalising prices was a cause of concern, alleged iron and steel manufacturers which have signed MoUs with the Orissa government.

They claimed NMDC adhered to a fixed price and did not resort to retendering if it had a long term MoU with steel units.

Long-term contracts could result in shut downs and loss of jobs, warned steel units in the state.