Steel companies skeptical about the move.
The state government is likely to ask Odisha Mining Corporation (OMC) to provide iron ore through long-term supply agreement to steel companies with whom it has signed MoU. However, steel manufacturers, already reeling under iron ore supply crunch for past couple of years, are sceptic about this decision.
The Chief Secretary has called a meeting with OMC officials on this issue on Tuesday afternoon.
“It is the first time the government has made such a move after our repeated complain of supply problems. This signifies a change in government stand, but I am doubtful about the outcome of the meeting,” said P K Jain, president of Arati Steel and Power, citing slower pace of implementation of government decisions.
Out of 45 companies, who signed MoU with the government, only 20 steel companies have started production at a fraction of their installed capacity due to lower availability of key raw material. In last two years, iron ore supplies have dried after the state government took a pro-active step to stop illegal mining, by suspending mineral extraction in over 50 iron ore mines, which is half of total operating mines.
Since then, the companies were sourcing the raw material from OMC through a quarterly auction route. But many steel companies later started complaining about the auction process, saying that the bigger companies often bid higher to artificially increase the price of iron ore and thus, deprive the smaller plants to buy.
“In fact, the decision of long term supply of iron ore is a response to poor buying demand through OMC regulated auction. The number of buyers has drastically dropped in past couple of quarters, forcing OMC to look for alternative routes to dispose off its unsold iron ore,” a trade source said in condition of anonymity.
In the January-March quarter, iron ore lump rates were marginally up at Rs 4,251 per tonne, against Rs 4,203 decided in the October-December period for Barbil sector, containing 62 per cent iron.
“The small rise in prices amid supply crunch shows lesser demand for the OMC supplied ores,” the source said.
All Odisha Steel Federation (AOSF), an association of small and large steel plants, including those who have not signed MoU with the state government, welcomed the state governments’ plan to provide iron ore through long term supply agreement, and said the government should also consider about smaller plants instead of prioritising only bigger ones.
“It is a welcome step that the government has finally changed its stand and has invited OMC to discuss about entering into long term supply agreement with the MoU signed companies. But apart from that, the government should also think about non-MoU signed companies, most of whom have shut operation due to unavailability of iron ore,” P L Kandoi, president of AOSF told Business Standard.
