India’s Ministry of Steel has advocated a policy framework for long-term supply contracts between iron ore miners and steel companies, replacing the predominant commercial sales of raw materials through e-auctions, a government official said on Friday, November 17.
The official said that the ministry felt that such a policy framework could be incorporated in the new National Mineral Policy, currently being drafted by the Ministry of Mines.
The model could be along the lines of the coal sector, wherein Coal India Limited, the largest coal supplier, enters into long-term supply contracts with thermal power companies, he said.
As in the case of coal, long-term supply contracts between raw material suppliers and end-users could be allocated through an auction process, the official added.
Currently, a few state government-owned mining entities like Orissa Mining Corporation have entered into long-term contracts with end-users of iron ore, but the dominant process of commercial sale of iron ore across the country is the e-auction route.
The Ministry of Steel favors long-term supply agreements as the dominant process of iron ore sales as it will insulate steel mills from fluctuations in raw material prices and will also enable miners to planning production and investments based on secure cash flow projections, the official added.