Miners prefer not to pass on royalty hike to consumers

Union govt announced to hike iron ore royalty from 10% to 15% of selling price

Iron ore miners in Odisha, the largest producing steel raw material state, said they would prefer not to pass on the royalty hike on the mineral to consumers as sluggish demand in past seven months has erased nearly a third of the commodity rate from previous year.

“There is no question of passing on the royalty hike as we do not see the market has any appetite for such rise,” said a trade official for Sirajuddin Mines, an iron ore miner.

The Union government on Wednesday evening announced to hike iron ore royalty from 10 per cent to 15 per cent of selling price, in response to long standing demand of mineral rich states, particularly Odisha.
 

While state governments see it as a key source of revenue, miners said the rise in royalty would add Rs 250-300 a tonne to the cost of production of the mineral.

“The decision to pass on the royalty burden would depend upon the profitability of the miner,” said an official of a large mining firm based in Odisha, without wishing to be named.

Iron ore prices in global as well as local markets have witnessed sharp decline from the start of 2014 on oversupply and a muted demand from main steel producers such as China.  

Though the prices have managed to come out of 21-month low at $89 a tonne seen in May, the prices have not been able to top over $100 a tonne since then.

The benchmark 62 grade iron ore fines today ended at $95 per tonne, after shedding 0.4 per cent from previous day trade.

In domestic markets, major producers such as Rungta and Essel Mining have not revised prices for high grade iron ore lumps in last two months owing to uncertainty of weather the Supreme Court would order mining ban in Odisha over inquiry report of Shah Commission, on the backdrop of slow demand. Prices of 63 grade iron ore lumps are currently hovering around Rs 6500-Rs 6800 per tonne at Joda and Koira mining circles, including the royalty.