A report tabled by the Comptroller and Auditor General suggests, iron ore miner National Mineral Development Corporation has suffered revenue loss of INR 745.94 crore during 2007-10 for not revising the domestic prices of the steel making raw material in accordance with the prevailing market rates.
Mr CS Verma chairman of SAIL and NMDC said that iron ore pricing is dynamic in nature and the pricing policy is governed by the board taking into consideration the prevailing market condition, market prices and the demand/supply position.
Mr Verma said that in the last three months, iron ore pricing is being decided on a monthly basis and in order to streamline the process, a consultant has also been appointed. As far as the CAG's findings on NMDC's losses are concerned, he did not wish to comment.
He said that global steel output has gone up by 0.7% and he expects India's steel demand to rise going forward. Besides, SAIL plants at the moment are running at over 100 percent capacity utilization.
Here is the edited transcript of the interview on CNBC-TV18.
Q - Give us a word on the observations made yesterday by the Comptroller and Auditor General about the kind of losses that National Mineral Development Corporation has suffered between the period of 2007 and 2010 in terms of not being able to hike prices as you should have, what is your response to that?
A - The report of the CAG has been read in the parliament and we will now see it in due course of time. The pricing policy of iron ore is decided by the board. The board takes into account all the factors such as the prevailing market condition, prevailing market prices, the international prices, demand/supply position and accordingly the price is decided. We will take a view in due course of time.
Q - Some of the discounts that you have handed out in the past to the steel industry etc. have been called unjust by the CAG. Do you think there is a case for rolling back some of these discounts and looking to raise your product prices at NMDC?
A - The CAG report has been read in the parliament so I would not like to comment on the pricing which have been done in the past. Pricing is a dynamic mechanism. We keep on changing the pricing policies also with the passage of time depending upon the market conditions. Earlier, we were following the netback system of pricing in iron ore.
When the export duty on iron ore increased from 20% to 30%, the netback system of iron ore pricing became infructuous. Then we resorted to quarterly pricing of iron ore. Since the market conditions became very volatile in the iron ore pricing market, we resorted to a monthly pricing mechanism.
In the last three months, we have been deciding the pricing of iron ore on a monthly basis. To streamline our pricing process, we have appointed a renowned consultant to study the various dynamics affecting the pricing and suggest a suitable formula for the pricing. The report of the consultant whom we have appointed is in the offing.
Q - Given the current conditions though, in terms of iron ore availability, is it possible that you have raised prices in January?
A - Today in India, the iron ore production is somewhere around 170 to 180 million tonne. The requirement of iron ore in India is roughly around 120 to 125 million tonne given the steel production because iron ore is used only for making steel. The remaining is getting exported.
Earlier also, we have seen the level of iron ore production in India to the level of about 225 million tonne and because of the various restrictions which have been imposed in the Karnataka region now, the iron ore production is hovering around 170 to 180 million tonne but the requirement of iron ore in India is somewhere around 125 to 130 million tonne.
