KOLKATA (miningweekly.com) - India’s Mines Ministry has ordered an investigation into possible cartel activities among merchant iron-ore miners, following the build-up of large stocks as steel producers and pellet manufacturers face supply shortages.

According to an official in the Ministry, mining advisory body Indian Bureau of Mines (IBM) had been directed to probe charges of cartel behaviour. An Investigation had started in the eastern Indian coastal province of Odisha.

Several user industries have complained to the Ministry that even as stockpiles across the country had risen to some 125-million tonnes, most merchant miners were not taking any measures to liquidate the stocks at pitheads, while also reducing production in order to keep prices at auctions at a higher level than normal demand-supply dynamics would warrant.

IBM has been directed to conduct an extensive study into existing stocks, levels of production over the past months, sales negotiated and offerings at auctions, and prices, as part of investigations to establish the veracity of charges of cartel activities among miners, the official said.

It has been claimed by pellet manufacturers that attempts to influence prices by limiting sales volumes despite large stockpiles became rampant soon after the national budget, which did not reduce the existing 30% export tax on high-grade lumps and fines.

With export opportunities limited and margins under threat from low international prices and high export tax, merchant miners had little option but to cartelise and protect domestic prices in order to protect their margins, even as fixed costs of mining operations remained the same, a pellet manufacturer with a plant in eastern India said.

The Ministry had also directed IBM to determine the viability of imposing a minimum production stipulation on merchant miners within the overall limits set, based on the environmental conditions of respective mines.

It was pointed out that under amended mining legislation, there existed provisions for the imposition of minimum production limits. But such provisions could be imposed only on mining leases awarded through the auction route and not on mines allocated earlier via the preferential route. IBM and the Mines Ministry was currently revisiting the legal options of imposing such minimum production limits for all mines in the case that evidence was found of deliberate under-production, the official added.