BHUBANESWAR: Exorbitant freight charges, frequent strikes by transporters and monopoly practices have hit hard raw material availability to steel industries operating in the State, especially those sourcing iron ore from Khandadhar mines.
The companies are now being forced to pay higher prices for transportation of their auction allocated material from Khandadhar mine to Barsuan railway siding on a consistent basis. Since excessive transportation cost significantly affects cost efficiency, it has affected competitiveness of steel companies which are located in eastern and central parts of the country. Khandadhar mines is run by the Odisha Mining Corporation (OMC).
In January, truckers in Koira region went on strike over hike in diesel rates, which led to a drop in number of vehicles engaged in lump transportation from Khandadhar mines to Barsuan siding. Taking advantage of this, transporters sought higher price for transportation of lumps which need to be lifted within a specified time limit allowed by OMC. The steel companies, which use iron ore, had no option but to pay in order to avoid EMD forfeiture and penalty.
“Truck strikes and freight hike by transporters have become a common practice in Koira region. Transporters exploit the situation and increase freight rate by Rs 50 per metric tonne. This unnecessarily increases the cost of production and affects the economy of the industry which is currently struggling for survival,” said a senior executive of a steel company.
For a distance of 18 km from Khandadhar mines to Barsuan siding, the government notified rate for six-wheelers was Rs 202 per metric tonne. Prior to the strike, the companies were charged Rs 300 per metric tonne but after the agitation, it was upped to Rs 350, leading to a hike in the range of 49 percent to 75 percent.
The steel units complain that enforcement of uniform freight rates announced by the Government remains a far cry. Monopoly by a particular transport agency in Khandadhar iron ore mines has further worsened the situation as the freight rate decided by the agency is much higher than the approved rates. Even other transporters willing to work at approved rates are being prevented by the agency.
Aggrieved steel companies have sought State Government’s intervention in breaking monopoly and enforcing uniform freight rates for mineral transportation. “Such malpractices are against the directions of the Orissa High Court and the objective of Competition Act, 2002. The steel sector needs a fair and congenial business environment to fight the global slump in demand. The State Government needs to intervene,” said an industry expert.