Promoters of steel units have welcomed the State Cabinet’s Tuesday decision to supply 20 per cent more iron ore to them, describing it as pro-industry under the long Term linkage Scheme of the State-owned Odisha Mining Corporation ltd (OMC). However, they contend that this policy decision would not help in the revival of steel units already closed down or on the verge of the closure.
“The problem lies in fixation of a base rate for auction. The system of auction is to get a fair rate depending on the demand-and-supply trend in the market, which is not practically achieved in the currently practised system because the base price fixed by the OMC is not realistic and hence is not fulfilling the objective of fair price determination,” said president of All Odisha Steel Federation (AOSF) and Kalinga Nagar Industries Association (KNIA) Pl Kandoi.
The recent shortage of supply, resulting from regulatory and other issues, has made iron ore either too expensive or just plain unavailable to these units. With no captive mines of their own, these units are dependent on the OMC iron ore. Kandoi said many of them are either shut or operating at as low as 20 per cent capacity. The non-MoU steelmakers have been protesting against what they call “negative attitude of the Government towards the steel sector”.
“The OMC has been fixing the base price of iron ore at a very high level. As a result, they are unable to sell their available stock in e-auctions. So, fairness is not seen in the process. In spite of being not able to sell the offered quantity, the OMC is sticking to higher base price. Now, because they have to sell out their stock offered in auction, they are tactfully allowing non-MOU units also to buy from the OMC at weighted average e-auctions rates,” Kandoi lamented.
The AOSF has been urging the OMC to adopt a “cost-plus” methodology similar to what the Coal India uses in the long-term interest of the manufacturing units within the State. “If the captive industries are getting iron ore by paying for the raising cost and royalty and the base rate of the raw material is three to five times more for non-captive units, there is no level-playing field for captive and non-captive units, he said.
The OMC, however, is not accepting the cost-plus pricing as demanded, saying it is not in keeping with the market. “If you look at iron ore prices of the NMDC or private players such as Serajuddin, the OMC’s prices are much lower,” a top OMC official said.