India’s ministry of mines has proposed benchmarking domestic iron ore price to indices of S&P Global Platts or similar market publications, according to a notification issued by the ministry seeking industry comments, said on Friday, June 20.
The new proposal aims to bring transparency to iron ore pricing, limiting the scope for mining companies to declare lower prices for higher grades. It will also ensure uniformity in iron ore prices, which previously varied across states, it said.
Currently, the Indian Bureau of Mines (IBM) announces the average sale price (ASP) of iron ore in the country based on self-declarations by mining companies. This ASP is then used to calculate royalty and District Mineral Fund (DMF) disbursals payable to states.
Moving away from the self-declaration regime, the ministry notification said that IBM shall compute the daily price of iron ore (60% to below 62% Fe grade) fines in Indian Rupees based on prices published daily by S&P Global Platts or other reputed publications for iron ore of the same grade.
Self -declared prices by mining companies had allowed the possibility of understating revenues, resulting in lower royalty payments to states.
States use the declared prices to calculate their revenue, as the law mandates that mining entities pay 15 percent of their iron ore sale revenue as royalty. Additionally, 2 percent of the royalty is allocated to the DMF, which is used to fund development activities in mining-affected areas.