NMDC wants ore export price revised

Expressing concern that imposition of export duty and hike in railway freight was ripping through its bottom line...

Expressing concern that imposition of export duty and hike in railway freight was ripping through its bottom line, state-run National Mineral Development Corporation NMDC has sought the government8217;s approval in re-negotiating iron ore prices with its Japanese and Korean buyers, but the commerce ministry is clearly not enthused.

In a letter to the steel ministry, NMDC said that it is required to pay additional railway freight of about Rs 1,000 per tonne for exporting the mineral, besides 15 per cent ad-valorem duty on ore export has entailed additional liability in the range of Rs 540 to Rs 820 per MT. 8220;It appears that NMDC will have to incur an additional cost of around Rs 1,800 per MT for its exports, which would bring down its net realisation,8221; the PSU8217;s chairman and managing director Rana Som said.

In a recent meeting with the ministry8217;s top brass, NMDC officials said the company would have no justification to export unless at least the additional cost incurred on account of railway surcharge and export duty is reimbursed by its overseas buyers. The PSU said several private miners are charging market prices for their ore from domestic buyers. Prevailing prices of calibrated ore vary between Rs 5,500 and Rs 7,000 per tonne depending on size and Fe content.

NMDC, on the other hand, supplies about 95 per cent of its produce through LTAs. If prices are revised in the current year, NMDC would sell ore at Rs 1,970 per tonne while its realisation from sales to Japan is just about Rs 1,370 per tonne, suggesting disparity in overseas and domestic trade margins.

But steel and commerce ministries are divided on the issue. While the steel ministry has endorsed NMDC8217;s proposal to include rail freight and 15 per cent export duty costs on top of a higher price for iron ore, the commerce ministry has opposed it saying India would risk jeopardising commercial relations with the two countries.

The commerce ministry appreciated NMDC 8216;s contention but observed that revenues from rail freight and export duty accrue to the government only and should not be built into export price. It also asked the PSU not to insist on getting reimbursements in view of public interest and Indo-Japan relations.

Rs 1,800The additional cost NMDC claims it has to bear per metric tonne for export

Rs 1,370The realisation per tonne from Japanese sales

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Rs 1,970The price NDMC says it would sell ore at per tonne if prices are revised this year