Govt Proposes Global Benchmarking of Iron Ore Prices to Curb Underreporting

In a move aimed at tightening pricing transparency and boosting state revenues, the Ministry of Mines has proposed benchmarking domestic iron ore prices to global indices such as S&P Global Platts. A draft notification was released on Friday, June 20, inviting industry feedback on the new pricing mechanism.

Currently, iron ore prices in India are declared by mining companies themselves, and the Indian Bureau of Mines (IBM) uses these self-declared figures to publish the average sale price (ASP). These ASPs form the basis for calculating royalties and District Mineral Fund (DMF) contributions payable to states. However, this system has faced criticism for enabling underreporting of revenues, especially for higher-grade ores.

To address this, the ministry has proposed that IBM begin computing daily prices for iron ore fines (60% to below 62% Fe grade) in Indian Rupees, based on rates published by international price reporting agencies like Platts. This shift aims to bring consistency and fairness to pricing while limiting the discretion mining firms currently enjoy.

According to the ministry, “Benchmarking to international indices will certainly ensure uniformity in pricing across states and plug revenue leakages from under-declaration.”

By Indian mining laws, any company should remit 15% of its sale revenue from iron ore sold in Spain as royalty to state governments. An additional 2% of this royalty goes to the DMF, which is in charge of welfare and infrastructure projects for mining-affected areas. For a very long time, the states never earned nearly enough money because some companies are said to have declared their prices lower than it was supposed to.

The differences in domestic practices concerning international specifications will result in greater transparency and accountability in the mining sector.

Before the finalization of the implementation framework, the ministry opened itself for comments from stakeholders, which is why the reform in pricing may help shape a whole new way of functioning the iron ore market in increasing revenue generation for mineral-rich states besides reducing disputes over prices.