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FIMI urges govt to remove trade barriers imposed due to e-auction mechanism.

Date: 06-04-2021
Subject: FIMI urges govt to remove trade barriers imposed due to e-auction mechanism
The Federation of Indian Mineral Industries (FIMI) on Monday urged the Centre and state governments to remove various restrictions imposed exclusively on iron ore trade in Karnataka.

Karnataka is the only state in India where the miners have no commercial freedom to sell their product, where entire ore has to be sold through institutionalised e-auction to parties meeting eligibility criteria- domestic-end users, FIMI, Southern Region, said in a statement.

It is also the only state from where export of iron ore and pellets made from Karnataka ore is prohibited, it stressed.

However, there is no corresponding requirement on the eligible purchasers to exclusively source from e-auction. Even though there is adequate supply of Karnataka ore which for the current financial year will be around 45 million tonnes (MT) against demand of around 36 MT, there has been consistent and substantial quantities imported from other states as well as abroad every year, tipping the balance and pushing the iron ore industry into duress.

"Owing to...non-level playing field in terms of trade restriction where the miners can only sell the material domestically, without any alternate market for sale, the prices in Karnataka are subdued and the Karnataka iron ore is being sold at USD 50 as against USD 140 internationally," it said.

Various rigorous conditions which are now strangling the iron ore industry were imposed by the Supreme Court in 2011, the FIMI claimed.

"The Court provided the rationale that such stringent measures were required to redress the extraordinary situation which existed then and to give time for the authorities to establish systems for monitoring," it said.

Central Empowered Committee-the commission of Supreme Court- itself has recommended to the apex court that these conditions have served the purpose and it is time to revisit the same, FIMI said.

"The restrictive trade practices in the state of Karnataka have detrimental effects on Karnataka iron ore industry and also resulting in low confidence among the investors particularly in iron ore sector. The existing iron ore mining operations in the state are not viable with cap on production and e-auction mechanism leading to unfair valuation of iron ore which is almost 200 per cent lower in the state of Karnataka compared to international prices," Santesh Gureddi, Vice President FIMI Chairman FIMI, Southern Region said.

"We urge state and central government to review the policies for state of Karnataka and bring in proper amendments which will be beneficial for the state of Karnataka," he added.

As per estimates, the gross loss over a five-year period to Karnataka is approximately Rs 30,000 crore due to e-auction mechanism with restrictions on sale of iron ore outside the state and exports.

Incidentally, the suppressed prices are a double whammy since these lead not only to lower royalty and other levies to the state but also reduces the bid premium on ore extracted from recently auctioned captive mines which is over and above the stated loss herein, FIMI, Sourthern Region, said.


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