An Indian government-appointed experts’ panel has proposed setting up the country’s first iron ore exchange to discover the domestic price of the key raw steelmaking raw material, government sources said on Wednesday, April 3.
The government appointed the panel after establishing that iron ore miners tended to keep average sale prices artificially low to pay a lower royalty rate to the government, the sources said.
The panel has proposed the setting up of a National Iron Ore Exchange with the mandate that all buying and selling of the raw material would be conducted on the online platform, record real-time transactions and physical deliveries leading to a transparent price discovery.
It said that, based in the weighted average sale price on the platform, the average sales price for each iron ore producing state will be fixed, on which miners will have to pay the royalty rate.
Currently, the price of the same grade of iron ore varies from state to state making it easier for miners to artificially deflate the sales price and pay a lower royalty amount.
The panel does not favour using international iron ore price benchmarks, arguing that these benchmarks are highly influenced by demand and the price of steel in China and are highly volatile compared to Indian prices.