BL reported that the recent hike in prices of iron ore by NMDC Limited has hit hard sponge iron manufacturers, particularly those in Chhattisgarh.
As per report, there are 90 sponge iron units in Chhattisgarh producing around 12 million tonnes annually. They source bulk of their ore requirement, about 10 to 12 million tonnes annually from Orissa and the balance, an estimated 3 million tonnes, from NMDC mines.
Mr Anil Nachrani president of Chhattisgarh Sponge Iron Manufacturers Association said that the hike in prices by NMDC ranges between 14% and 17% for the July to September 2010 quarter. Thus, the price of crushed lump ore has been raised by nearly 17% to INR 4,364 from INR 3,734 a tonne and of lumps by 14% to INR 3,650 from INR 3,200 a tonne.
He added that "This is surprising when private mine owners of Orissa have brought down prices by INR 750 a tonne. We do not find any justification for NMDC's price hike."
The extent of price increase since April 1st 2010 has been staggering, about 59.97% for CLO and 57.19% for lumps, it is pointed. As on March 31st 2010, the price of CLO was INR 2,728 a tonne, raised by INR 1,006 a tonne to INR 3,734 a tonne from April 1st 2010 and the price of lumps during the same period was revised from INR 2,322 to INR 3,200 a tonne or by INR 878 a tonne or 37.81%.
It is pointed out that the hike has pushed up production cost to such a high levels that it has become more than the selling price of the finished goods, with the result most sponge iron units have curtailed their production, operating at less than 50% capacity, it is pointed out. About 10 to 12 units are already closed.
Mr Nachrani has urged NMDC to bring down iron ore prices to the April to June 2010 period levels; otherwise, many units will face closure. He has also urged NMDC not to burden consumers with royalty bill. The Government has imposed royalty on mining industry earning huge profits. The burden of royalty should not be passed on to iron ore consumers who are already paying Excise Duty /VAT. Worse, sponge iron producers do not get the benefit of MODVAT credit on royalty and will therefore find it difficult to absorb its impact.
(Sourced from www.thehindubusinessline.com)
