KOLKATA (miningweekly.com) - India’s plan to introduce a nationwide iron-ore e-auction was floundering amidst opposition from provinces and steel producers and allegations of price manipulation at the trial run.

The Mines Ministry has proposed implementing an e-auction for the allocation of iron-ore deposits to ensure transparency, efficient price discovery and royalty payable to provinces bearing the resource, and had sought views of the provincial governments on its implementation, an official in the Mines Ministry said.

However, in a meeting of a coordination committee on mines and mineral development and regulation held earlier this week, the e-auction proposal ran into rough weather with both the Steel Ministry and provincial governments opposing the model, the official said.

The Steel Ministry maintained that to ensure planned growth in domestic steel production, it was imperative to first establish assured raw material linkages to steel producers and offer only the balance for allocation through e-auctions.

Expressing concern over the rising shortage of iron-ore faced by steel producers, the Steel Ministry demanded its counterparts in the Mines Ministry evolve a mechanism for allocation of iron-ore that would offer steel producers long-term raw material security and maintained that the proposed e-auction would not serve such a purpose.

The provincial governments of the resource-bearing regions were opposed on the grounds that in Karnataka, in southern India, where e-auctions had started on a trial basis, the entire process was now dogged by controversy over price manipulation and allegations of cartelisation of miners.

Steel producers have made representations to the Ministry that iron-ore prices in Karnataka had increased by 80% over the past five months following alleged cartelisation of miners in the province.

“In the last four to five months, the base price of iron-ore has been going up in the auctions, while NMDC, the country’s largest government-owned miner’s prices had remained more or less the same, the rupee:dollar exchange rate has been stable, Orissa prices have not gone up, and international prices have come down, so on what basis have Karnataka prices been going up?” joint MD for JSW Steel Seshagiri Rao was quoted in the local media.

Steel producers have demanded that the Mines Ministry immediately set up an independent regulator for the iron-ore market and were also considering filing a complaint before the Competition Commission of India.

However, the Federation of Indian Mineral Industries has vehemently denied any cartelisation or price manipulations by any miners in Karnataka.

Under the circumstances of controversy surrounding the trial e-auction in Karnataka, and opposition from other stakeholders, implementing the model across the country was not feasible, although neither was there a solution from government, officials in the Mines Ministry said.