Reports worry over the NMDC move to double iron ore price and thus push inflation drive off track. Had it been a private-owned corporation, the report would have attempted to justify the move on the ground of global economic recovery, therefore firming up of commodity prices
PSUs are favorite shooting ducks for the Indian media. There are good reasons for the same. Few government companies have the support of professional communicators to rein in the media exuberance. Whatever skeleton these companies carry in the guise of corporate communication departments the members of the staff are ill-equipped to handle the barrage of inputs fed regularly by professional spin doctors engaged by the well-oiled private sector companies. The end result is critically mentioned in media. NMDC is one such victim of constant negative mentions in various press reports.
When the listed Navratna iron ore giant NMDC negotiates for higher price for its ore, we show our concern over inflationary effect. Reports worry over the NMDC move to double iron ore price and thus push inflation drive off track. Had it been a private-owned corporation, the report would have attempted to justify the move on the ground of global economic recovery, therefore firming up of commodity prices.
But in case of the PSU, when its chairman and managing director Rana Som points out that globally ore prices have already risen or are expected rise by up to 90 per cent and asserts, “We are also operating in a market and are commercial organisation. If prices move up, we have to ultimately align our prices with global benchmarks,” the tone of the report betrays the bias.
In fact some comments in news reports are direct, “The high iron ore prices could push up steel prices to the peak levels of 2008, undermining the government's efforts to contain inflation given that steel is a vital input for a range of industries.”
Why do we readily take up the cudgel against input price rise? Accustomed as we have been in the system of stable long term input prices instinctively we oppose such a move. We do not want price fluctuation as obtained globally. Curiously, many private sector corporations who claim to be competing in the global big league create pressure group in favour of static and low prices.
For instance media report expressed concern on possible steel price hike, if NMDC raise its price of ore between 80-90 per cent for the year 2010-11. This would push up steel prices as companies like Essar Steel, Jindal Steel, JSW Steel et al buy a significant part of their raw material from NMDC.
In any case steelmakers had hiked steel prices by up to Rs 3,000 per tonne with effect from April 1. Their argument is that raw materials constitute over 40 per cent of the final cost of steel. NMDC has already raised its ore price provisionally by around 55 per cent for the current financial year. It adjusted its price twice — once in January and again in April. Point to note is that steel prices are currently at Rs 35,000-38,000 a tonne stand well below the 2008 level when the price touched a high of Rs 50,000 per tonne. If the market then could absorb the steel price without causing much of an inflationary concern there certainly is room for NMDC to raise its price.
Rightly, therefore, NMDC is negotiating long term contract prices with Japanese steel mills. This serves as the benchmark price for the domestic consumers. In fact Global iron ore producers like Vale SA and BHP Billiton are also expecting a rise in price in the near term which made them deviate from a 40-year old system of fixing prices on annual basis and to opt for short-term raise. In the process the Brazilian company successfully negotiated a 90% price increase. If NMDC, a listed company with more than Rs115,000 crore of market cap does not take the cue it will be blamed by its shareholders.
Meanwhile, the Navratna company continued to suffer from the inability of the state to solve the problem of naxal politics in its zone of operation. The blowing up by the Naxalites of the 267-km Essar pipeline, near Chitragonda (Orissa) in June 2009, led to a sharp fall in NMDC sale. The pipeline carried iron ore slurry from a beneficiation plant at Bailadila to its pellet plant at Visakhapatnam (Andhra Pradesh). This resulted in lower despatches of four million tonnes, which would affect its net profit adversely for 2009-2010. NMDC’s production in the previous year was 28 million tonnes. However the firming up of price later in the year came as a positive factor.
Reportedly, NMDC sources confided the same to media as well, “We will still maintain an earnings before interest, taxes, depreciation and amortisation (EBITDA) margin of 75 per cent.” NMDC had revenues of Rs 7,564 crore and returned a net profit of Rs 4,372 crore. But the first three quarters of 2009-10 gave a profit of around Rs 2,300 crore, nearly Rs 2,000 crore less than that of the last financial year. How much can the company earn in the fourth quarter — Rs 2000 crore upwards?
The incontrovertible fact is no business can run smoothly unless the law and order situation is conducive. One major complaint of those up in arms in the naxal dominated regions is that resources from their habitat get extracted with no resultant benefits to the inhabitants. This might be the cold result of a capitalist system but certainly not warranted in a participating democracy.
NMDC, as a socially aware corporation, is well aware of the need. It has therefore been working towards setting up a steel plant at Bastar. It will start the construction work for its 3-million tonnes per annum (mtpa) integrated steel plant in Bastar district of Chhattisgarh in October this year according to Rana Som.
“The company has started the process of tendering and the work on the project will start in October this year.” The integrated steel plant of the country's biggest iron ore producer and exporter will come up near Nagarnaar, about 20 km from the divisional headquarters of Bastar. The company plans to invest about Rs 12,000 crore on the project.
The project is a personal triumph of NMDC Chairman who want the forward integration to sustain the company. The Bastar project had to cross many hurdles. In w2008 Ram Vilas Paswan, the then Union Minister for Chemicals and Fertilisers and Steel, and Chief Minister of Chhattisgarh Raman Singh laid the foundation stone for the proposed steel plant in September. The state government had acquired 403 hectares of land for the company in early 1990's. NMDC had plan to complete the work in 36 months and start production by year 2011. According to CMD Som it would take another 40 months to complete the work and start the commercial production.
The drawing and designing work had been completed. The iron ore for the plant will come from the company's mechanised mines in Bacheli-Kirandul of Dantewada district. The company would be setting up a second rail line of about 100 km between Jagdalpur and Bacheli to facilitate shipment of raw material. The steel plant is expected to create about 12,000 indirect and direct employment in the tribal-dominated pocket of the state. This will be NMDC's contribution to the people of Dantewads district and certainly will prove as a show case project for those who intend to solve the naxal problem.
PSUs are favorite shooting ducks for the Indian media. There are good reasons for the same. Few government companies have the support of professional communicators to rein in the media exuberance. Whatever skeleton these companies carry in the guise of corporate communication departments the members of the staff are ill-equipped to handle the barrage of inputs fed regularly by professional spin doctors engaged by the well-oiled private sector companies. The end result is critically mentioned in media. NMDC is one such victim of constant negative mentions in various press reports.
When the listed Navratna iron ore giant NMDC negotiates for higher price for its ore, we show our concern over inflationary effect. Reports worry over the NMDC move to double iron ore price and thus push inflation drive off track. Had it been a private-owned corporation, the report would have attempted to justify the move on the ground of global economic recovery, therefore firming up of commodity prices.
But in case of the PSU, when its chairman and managing director Rana Som points out that globally ore prices have already risen or are expected rise by up to 90 per cent and asserts, “We are also operating in a market and are commercial organisation. If prices move up, we have to ultimately align our prices with global benchmarks,” the tone of the report betrays the bias.
In fact some comments in news reports are direct, “The high iron ore prices could push up steel prices to the peak levels of 2008, undermining the government's efforts to contain inflation given that steel is a vital input for a range of industries.”
Why do we readily take up the cudgel against input price rise? Accustomed as we have been in the system of stable long term input prices instinctively we oppose such a move. We do not want price fluctuation as obtained globally. Curiously, many private sector corporations who claim to be competing in the global big league create pressure group in favour of static and low prices.
For instance media report expressed concern on possible steel price hike, if NMDC raise its price of ore between 80-90 per cent for the year 2010-11. This would push up steel prices as companies like Essar Steel, Jindal Steel, JSW Steel et al buy a significant part of their raw material from NMDC.
In any case steelmakers had hiked steel prices by up to Rs 3,000 per tonne with effect from April 1. Their argument is that raw materials constitute over 40 per cent of the final cost of steel. NMDC has already raised its ore price provisionally by around 55 per cent for the current financial year. It adjusted its price twice — once in January and again in April. Point to note is that steel prices are currently at Rs 35,000-38,000 a tonne stand well below the 2008 level when the price touched a high of Rs 50,000 per tonne. If the market then could absorb the steel price without causing much of an inflationary concern there certainly is room for NMDC to raise its price.
Rightly, therefore, NMDC is negotiating long term contract prices with Japanese steel mills. This serves as the benchmark price for the domestic consumers. In fact Global iron ore producers like Vale SA and BHP Billiton are also expecting a rise in price in the near term which made them deviate from a 40-year old system of fixing prices on annual basis and to opt for short-term raise. In the process the Brazilian company successfully negotiated a 90% price increase. If NMDC, a listed company with more than Rs115,000 crore of market cap does not take the cue it will be blamed by its shareholders.
Meanwhile, the Navratna company continued to suffer from the inability of the state to solve the problem of naxal politics in its zone of operation. The blowing up by the Naxalites of the 267-km Essar pipeline, near Chitragonda (Orissa) in June 2009, led to a sharp fall in NMDC sale. The pipeline carried iron ore slurry from a beneficiation plant at Bailadila to its pellet plant at Visakhapatnam (Andhra Pradesh). This resulted in lower despatches of four million tonnes, which would affect its net profit adversely for 2009-2010. NMDC’s production in the previous year was 28 million tonnes. However the firming up of price later in the year came as a positive factor.
Reportedly, NMDC sources confided the same to media as well, “We will still maintain an earnings before interest, taxes, depreciation and amortisation (EBITDA) margin of 75 per cent.” NMDC had revenues of Rs 7,564 crore and returned a net profit of Rs 4,372 crore. But the first three quarters of 2009-10 gave a profit of around Rs 2,300 crore, nearly Rs 2,000 crore less than that of the last financial year. How much can the company earn in the fourth quarter — Rs 2000 crore upwards?
The incontrovertible fact is no business can run smoothly unless the law and order situation is conducive. One major complaint of those up in arms in the naxal dominated regions is that resources from their habitat get extracted with no resultant benefits to the inhabitants. This might be the cold result of a capitalist system but certainly not warranted in a participating democracy.
NMDC, as a socially aware corporation, is well aware of the need. It has therefore been working towards setting up a steel plant at Bastar. It will start the construction work for its 3-million tonnes per annum (mtpa) integrated steel plant in Bastar district of Chhattisgarh in October this year according to Rana Som.
“The company has started the process of tendering and the work on the project will start in October this year.” The integrated steel plant of the country's biggest iron ore producer and exporter will come up near Nagarnaar, about 20 km from the divisional headquarters of Bastar. The company plans to invest about Rs 12,000 crore on the project.
The project is a personal triumph of NMDC Chairman who want the forward integration to sustain the company. The Bastar project had to cross many hurdles. In w2008 Ram Vilas Paswan, the then Union Minister for Chemicals and Fertilisers and Steel, and Chief Minister of Chhattisgarh Raman Singh laid the foundation stone for the proposed steel plant in September. The state government had acquired 403 hectares of land for the company in early 1990's. NMDC had plan to complete the work in 36 months and start production by year 2011. According to CMD Som it would take another 40 months to complete the work and start the commercial production.
The drawing and designing work had been completed. The iron ore for the plant will come from the company's mechanised mines in Bacheli-Kirandul of Dantewada district. The company would be setting up a second rail line of about 100 km between Jagdalpur and Bacheli to facilitate shipment of raw material. The steel plant is expected to create about 12,000 indirect and direct employment in the tribal-dominated pocket of the state. This will be NMDC's contribution to the people of Dantewads district and certainly will prove as a show case project for those who intend to solve the naxal problem.
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