Why only 25% ore is sold in two e-auctions this week?

GOANEWS DESK, PANAJI | 11 September 2015 22:21 IST

The e-auction of iron ore in Goa government’s possession has received a severe setback with less than 25 per cent ore selling in the last two e-auctions held so far.

The major hurdle is the lowest minimum price of Rs 500 per tonne fixed by the Supreme Court’s monitoring committee while the international price has crashed to Rs 250 per tonne.

The second hurdle is the 30 per cent export duty levied by the Government on the ore below the grade of 58% Fe, which is extracted in Goa at large.

The Mines department had two e-auctions so far this week, on 7 and 10 September, of total 2.30 million tonnes.

But hardly 0.607 MT was sold, which is hardly 26 per cent.

“Very few buyers are coming forward due to crash in the price in the international market” says Prasanna Acharya, Director of Mines.

Goa is selling ore between 42% Fe to 61% Fe grade, the large chunk of which is below 58% Fe.

According to Acharya, the main buyer of this low grade ore is China while the price of it has crashed to mere $49, which is around Rs 3100.

How does it not benefit, when the ore is sold for Rs 500 per tonne?

Parag Nagarsekar, the assistant director of mines, explains:

The freight in China is $11, which brings down the actual price to $38 per tonne.

At an average rate of around Rs 65 per dollar, the price of ore thus falls down to Rs 2470.

The duty levied on the ore comes to around 65%, which includes 30% export duty, 15% royalty, 10% mineral foundation tax and 10% for Goa Mineral Ore Permanent Fund.

This brings down the price to Rs 865 per tonne.

The additional expenditure to transport the ore from the mining lease and load it in the ship at MPT comes to around Rs 655 per tonne.

It includes Rs 155 per tonne by MPT for loading, barge charges of Rs 100, Rs 220 for barge loading and truck transport of average Rs 180 per tonne.

What is earned on the ore purchased at Rs 3100 per tonne is Rs 210 per tonne, while the price has fallen down to Rs 250 per tonne. The profit is hardly Rs 40 per tonne.

According to Nagarsekar, even the sponge iron plans within India cannot afford it due to heavy expenditure they incur on truck transportation.

The only buyer for Goa’s ore, even through e-auction, is Sesa Sterile of Goa, which requires around 70,000 tonnes per month for its sponge iron plant at Amona.

“But they prefer extracting their own ore and buy our ore only to meet the shortfall”, says Nagarsekar. 

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