NMDC must sell ore locally at export price: Steel min panel

The committee headed by additional secretary S Machendranathan rejected this demand on both counts. It opined that cost-plus methodology (on the basis of production cost along with some profit margins) used for commodities sold under the administered price mechanism,is not applicable to iron ore since its distribution and pricing is free of government control.

It also found no merit in ore prices being determined by the forces of supply and demand. It reasoned that with production levels touching 30 million tonnes,it cannot depend on spot markets as it needs continuous and assured lifting of its produce to sustain the extraction levels.

The company exported over 12 per cent of its output last year and will export fines (little over 62 per cent iron content) at over Rs 8,000 a tonne. It had raised prices of iron-ore fines for domestic steel companies by 35 per cent to Rs 2,500 a tonne.

It recommended that the prices settled by NMDC with its Japanese and South Korean buyers were the most reliable and transparent benchmark for settling prices with its domestic consumers and also that NMDC be allowed to negotiate quarterly prices with its domestic customers as it does with its overseas customers. It also said that both groups of customers be treated on par if the company were to change the periodicity in prices. The panel endorsed the decision of NMDC Board on deducting export duty from export prices in order to bring prices in line with those prevailing in domestic markets.

Reacting to a suggestion of steel makers,NMDC said that deducting service charges paid to Minerals and Metals Trading Corporation (MMTC),the canalising agency,from the Freight On Board (FOB) realisation to calculate net sales realisation was untenable. The Machendranathan committee shot down a demand by state-run steel maker Rashtriya Ispat Nigam Limited (RINL) that it be supplied iron ore at a different price.