In a significant policy move aimed at improving resource utilisation and strengthening raw material availability for the steel sector, the Government of India has amended the Mineral Concession Rules to introduce a structured pricing mechanism for low-grade haematite iron ore.
The notification, issued on April 10, 2026, marks the first time a formal system has been established to determine the Average Sale Price (ASP) for iron ore with lower iron content. The move is expected to bring clarity in valuation and encourage the use of previously underutilised mineral resources.
Bringing Structure to Low-Grade Ore Pricing
The revised framework specifically targets iron ore with iron (Fe) content below 45%, including deposits such as Banded Haematite Quartzite (BHQ) and Banded Haematite Jasper (BHJ). These resources, though abundant in India, have historically remained underexploited due to the absence of a clear pricing mechanism.
Under the new rules:
- Iron ore with Fe content between 35% and below 45% will be priced at 75% of the ASP of 45–51% grade ore
- Ore with Fe content below 35% will be valued at 50% of the same benchmark
By using the 45% Fe threshold as a reference point, the government has introduced a differentiated pricing model that aligns valuation more closely with ore quality.
Shift from Earlier Pricing Practices
Previously, there was no dedicated pricing structure for low-grade iron ore. In practice, higher-grade benchmarks were often used across categories when calculating ASP, royalties, and premiums.
This approach led to inflated cost structures for low-grade material, making its extraction and processing economically unattractive. As a result, large volumes of such ore remained unused despite their availability.
The updated framework replaces this one-size-fits-all approach with a more nuanced system, ensuring that pricing reflects the actual grade and economic potential of the resource.
Impact on Royalty and Levy Calculations
One of the most significant implications of the amendment lies in how royalties and premiums are calculated.
Earlier, applying higher-grade ASP benchmarks to low-grade ore resulted in elevated levies, further discouraging its commercial use. With the revised pricing formula:
- The effective royalty burden on low-grade ore is expected to decline
- Mining companies may find it more viable to process and sell such material
- Previously uneconomical deposits could now enter the supply chain
This shift could play a key role in improving overall efficiency within the mining sector while supporting downstream industries.
Unlocking India’s Low-Grade Iron Ore Reserves
India possesses substantial reserves of low-grade iron ore, much of which exists in the form of BHQ and BHJ formations. These deposits have traditionally been classified as sub-threshold resources due to their lower iron content and limited direct usability.
However, advancements in mineral processing technologies—particularly beneficiation—have made it possible to upgrade such material into usable feedstock for steel production.
The introduction of a transparent pricing mechanism provides a strong foundation for integrating these reserves into mainstream supply. It also aligns with broader efforts to optimise resource utilisation and reduce dependency on high-grade ore.
Clarifications on Run-of-Mine (ROM) Material
The amendment also addresses the treatment of run-of-mine (ROM) ore, which refers to raw material extracted directly from mining operations before processing.
Under the updated rules:
- If processing leads to a reduction in the economic value of the ore, royalty will be calculated based on lumps and fines obtained after initial screening
- The framework ensures that processing activities are not used as a means to artificially lower the assessed value of minerals
This clarification aims to maintain transparency in valuation while preventing potential misuse of processing mechanisms for reducing royalty obligations.
Implications for the Steel Sector
The new pricing structure is likely to have a broader impact on the steel industry, which relies heavily on consistent and cost-effective raw material supply.
By enabling the utilisation of low-grade ore:
- The availability of iron ore feedstock could increase
- Pressure on high-grade reserves may ease over time
- Steel producers may gain access to alternative raw material sources
This could support long-term supply stability, especially as demand for steel continues to grow across infrastructure, construction, and manufacturing sectors.
Policy Significance and Industry Outlook
The amendment reflects a policy shift towards more efficient mineral resource management. By aligning pricing with quality and enabling the use of lower-grade materials, the government is addressing both supply-side constraints and cost inefficiencies.
It also signals a move toward more granular regulation in the mining sector, where differentiated treatment of resources can lead to better outcomes across the value chain.
While the broader royalty framework remains unchanged, the introduction of this pricing model adds an important layer of clarity for industry participants.
Conclusion
The government’s decision to introduce a structured pricing mechanism for low-grade iron ore represents a key development in India’s mining and metals sector. By establishing clear valuation norms and reducing the cost burden associated with such materials, the amendment opens the door for wider utilisation of existing reserves.
This step not only enhances transparency in pricing but also supports the efficient use of natural resources, contributing to a more balanced and sustainable supply ecosystem.
Summary
The Government of India has amended the Mineral Concession Rules to introduce a pricing framework for low-grade iron ore below 45% Fe content. The new structure links pricing to existing benchmarks, reduces royalty burdens, and enables the use of previously underutilised reserves such as BHQ and BHJ. By improving valuation clarity and supporting beneficiation, the move is expected to enhance resource utilisation and strengthen raw material availability for the steel sector.
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