Exorbitant freight charges and frequent strikes by transporters are severely affecting the raw material availability and competitiveness of steel industries, especially which are sourcing iron ore from Khandadhar Mines in Sundargarh district, run by the Odisha Mining Corporation (OMC).
The companies are forced to pay higher price for transportation of their auction allocated material from OMC’s Khandadhar mine to Barsuan siding on a consistent basis. Excessive transportation cost significantly affects the cost efficiency of many steel companies which are located in the eastern and central parts of India.
In January, 2017, the truckers in Koira region held a strike over the hike in diesel rates. This significantly reduced the number of trucks engaged in OMC lump transportation from Khandadhar mine to Barsuan siding. Taking advantage of the situation, transporters demanded higher price for transportation of lumps, which need to be lifted within a specified time limit allowed by the OMC. The iron ore user companies had no option to pay higher transportation charges in order to avoid EMD forfeiture and penalty.
“Truckers’ strikes in Koira region and freight hike by the transporters have become a common practice in the region. The transporters exploit the situation and increase the freight rate by Rs 50 per MT. This unnecessary additional cost component increases the cost of production and affects the economy of the industry, which is currently struggling for survival, given the current critical situation,” said a senior official of a steel company.
The enforcement of the uniform freight rates, announced by the State Government is still a challenge and is not being implemented on the ground. Monopoly by a particular transport agency in Khandadhar mines further worsens the situation and the freight rate decided by that particular transport agency is much higher than the Government approved freight rates. Even other transporters who are willing to work at approved rates are being kept away by the dominant agency. Such malpractices are against the intent of the State Government for ensuring fair trade practices in mineral transportation and the directions of the Orissa High Court and against the objective of The Competition Act, 2002.
Marred by higher transportation cost, the steel companies dependent on Khandadhar mines of OMC are looking towards the State Government’s intervention in breaking monopoly and enforcing uniform freight rates for mineral transportation. “The steel sector needs a fair and congenial business environment to fight the global slump in demand. The State Government needs to intervene to ensure competitive and realistic freight regime in the State to boost the industrialisations,” said an industry expert.
“The Odisha Government has created a Directorate of Steel for facilitating enabling condition of the value addition industry to operate at a viable scale and subsequently create employment and generate revenue for the State. In this context, the Directorate should act in coordination with the Transport Department to curb monopoly practices of transporters and frequent strike by the truckers,” added the expert.
According to sources, considering this issue as a serious one, Directorate of Steel presented a report recently before State Government regarding the monopoly practices of transporters, but action has not yet been taken to check the monopoly of transporters.
Sundargarh Collector Bhupinder Singh Punia assured of taking necessary steps in this regard. “I will definitely look into it,” he said, when his attention was drawn into the issue.