The FOB price of iron ore quoted by the Karnataka Lokayukta in his report, which indicts the Karnataka chief minister, his cabinet colleagues and hundreds of government officials, are the spot prices at which iron ore trade with China was carried out at one point of time.
However, the basis for pricing by NMDC for its export in the international market was the outcome of the negotiations between Japanese steel mills on the one hand and the Australian and Brazilian mines on the other hand, NMDC said in a release clarifying the pricing issue.
In the year 2007-08, the long term price for sale of iron ore from Donimalai was $63.51 per tonne and $50.99 per tonne for lumps and fines, respectively, for the entire year. As, the long-term prices were valid for the whole year, the international long term prices for the period 2007-08 remained at the contracted prices, even though the spot prices varied between $60 a tonne and $168 a tonne during the year.
However, at the end of the year 2008 itself, the spot prices dropped to the range of $65 to $75 per tonne for iron ore fines where as the long term prices for 2008-09 at which NMDC sold its product to Japan and South Korea had been $92 a tonne.
"It would be appreciated that the entire long term contracts and its pricing on year-to-year basis was based on the transparent policies and as per established worldwide benchmarks," NMDC said.
NMDC has asked the media to better explain the iron ore pricing issue so that the public understands the nuances of the pricing mechanism of iron ore in the international and domestic markets,