Turning the tables on the steel makers and NMDC, Sesa Sterlite executive director PK Mukherjee said that by not benchmarking the Indian price of iron ore to international prices, not only NMDC is losing, it is also subsidising the steel players in the country. In an interview with Promit Mukherjee, he said while there has been no off-take of its ore in the last three auctions, considering the demand and supply mismatch, the company would now reduce the price of iron ore in the forthcoming e-auctions while continuing to pursue the government for allowing exports. Edited excerpts:

How many auctions has Sesa Sterlite participated in Karnataka so far since January 31?

Post January 31, three times. In total four times, including on March 3.

How has the prices of Sesa Sterlite?s iron ore evolved in the subsequent auctions since then?

Price of 55%, 56% and 57% Fe grade have come down by R700 per tonne or about 20% while that of 61% Fe grade has come down by about 5% so far. Next auction would see further reduction in price by 15-20%. New grade of 54% Fe grade was put up on February 21 auction at R2,300 per tonne.

What was the total quantum of iron ore put up for auction so far? What were the grades and what was the highest and lowest base price for each auction?

Total quantity put up so far was 308,000 tonne. On January 31, the price range was R3,500 per tonne to R5,000 per tonne, on February 14 the range was R2,800 per tonne to R4,800 per tonne and February 21 was just one grade of 54% Fe at R2,300 per tonne.

What is the mechanism adopted for fixing the base price for the iron ore?

The best way would be to sell at free market price. But since the market is being tampered by export duty and differential railway freight, we are forced to fix the price somewhere between export and import parity price to start with and then adjust after seeing demand/supply. We will continue to request the government to remove export duty and differential railway freight meant for export of iron ore and create free market by effectively allowing the choice to export or sell in the domestic market to the miners.

Seeing there is lacklustre demand, has the company brought down the prices?

Since exports are currently disallowed and domestic buyers are working as cartel, we have no other way to go but to bring down the prices with which the bigger loser would be the government.

Any reasons why there has been no off-takes so far?

Cartelisation by buyers.

Although the claims of cartelisation could eventually be unfounded, how do you contest the claims of steel companies that Sesa Sterlite?s ore is deliberately being highly priced?

High price is relative to NMDC price which according to us is priced abysmally low compared with international iron ore index price.

Is it justified in India that while steel is benchmarked to international prices, iron ore doesn?t really reflect the co-relation with benchmark prices?

This question is hitting the nail at right place. The answer is ?there is absolutely no justification?. The steelmakers of Karnataka justify the price rise of steel (companies have been hiking steel prices every month since January this year) saying that the steel price is lower than the price of imported steel even after increase (after paying import duty) while they buy iron ore from the government company NMDC at a landed cost which is about 40% of the import parity price.

And one can imagine the further upside in the economics of steel makers in India having captive iron ore ? they also sell steel at internationally benchmarked price but want to buy iron ore at a cheaper rate.

What is the price difference between NMDC, Sesa Sterlite and benchmark international prices?

According to the e-auction on February 14, the price of 60% Fe grade for NMDC stood at R2,170 per tonne while that of Sesa Sterlite stood at R4,000 per tonne, we sold 57% Fe grade on February 14 but the equivalent price for 60% Fe grade.

Now if you compare that with the price of imported Australian ore of the same grade, it will cost any company up to R8,564 per tonne after including 2.5% import duty and rupee conversion ratio at R62 to a dollar. If the miners in India export that ore in the international market, they would get R5,014 per tonne adding export duty and the converting the rupee to dollar.