India plans to tweak iron ore sale price formula

India plans to tweak a formula to fix the average domestic sale price of iron ore, a key steel making raw material, according to a government note. After the Ministry of Mines pointed out that some iron ore miners tried to keep the average sale price artificially lower to pay lower royalties to the government, the federal government formed a panel to work out an “alternative mechanism” to determine domestic iron ore prices.

The government note mentioned that any reduction in the ASP (average sale price) of iron ore through unscrupulous means will impact the revenue accruing to the government on account of auction premium royalty.

The government currently levies a uniform 15% royalty. The government-appointed panel met last week, and it is specifically examining the current pricing mechanism adopted by iron ore producers of Odisha, Karnataka, Jharkhand and Chhattisgarh – the states that are India’s biggest iron ore producers. The panel would work out a formula that would narrow the prevailing price gap among top-producing states.