India has started experimenting with index-based iron ore pricing mechanism — on global lines like the London Metal Exchange or Platts.

The experiment aimed at better market-linked price discovery — and easier royalty calculations — is a bold move which the State-run miner NMDC Ltd kicked off from April.

The move, if successful, could open up export opportunities because of it being a more transparent price discovery mechanism.

In a review meeting of the Steel Ministry held earlier this month, NMDC said it started index-based iron ore pricing “on a trial basis,” as per documents presented to the Ministry, and seen bybusinessline.

“This transition to index-based pricing aligns our market offerings more closely with international benchmarks and enhances transparency for our stakeholders,” it was said during the performance briefing.

The newly-adopted pricing mechanism ties NMDC’s rates to the global Platts IODEX index, adjusted for currency fluctuations and weighted against recent domestic auction prices.

The method gives a 70 per cent weight to the Platts-based price, 20 per cent to NMDC’s own e-auction outcomes and 10 per cent to State-run Odisha Mining Corporation’s auction prices, reflecting an industry-wide price discovery approach.

All prices will be converted to US dollar using the day’s exchange ratio.

The trial of index-based pricing marks a strategic pivot for NMDC, which has long faced criticism for opaque, ad hoc pricing practices.It has been following an average selling price method (12 month average) as the general practice.

Analysts suggest that if the trial succeeds, it could standardise price discovery across India’s fragmented iron ore market and bring NMDC’s rates closer to global export parity — a move that could both improve profitability and aid steel makers looking for more predictable input costs.

The shift comes on the back of NMDC clocking its highest-ever April production and sales beginning this fiscal, signalling strong operational momentum and a drive towards international pricing parity. According to the company’s documents, NMDC recorded a 15 per cent year-on-year increase in production for April of fiscal year 2025-26, marking the most productive April in its history. Sales for the same month rose 3 per cent from the previous year, following an earlier record-breaking fourth quarter where the company posted its highest quarterly sales to date.

On the capital expenditure front, NMDC highlighted adjustments to its ongoing land lease acquisition for RINL, with a finalised 30-year lease reducing related expenses by ₹171 crore.

The company’s budgeted capital outlay for FY26 stands at ₹3,517 crore.

Nearly ₹12,000 crore of expansion projects are already underway and are expected to be compled over the next three years, the review document says. Till April, nearly ₹4,800 crore of the expansion projects have materialised, while another ₹2,000 crore are expected to be invested during the fiscal.

Development of the Tokisud coal block is expected to be completed by November (nearly 5 years post allotment) at a projected cost of ₹574 crore (of which ₹333 crore has already been invested) while for the Rohme coal block, the tentative development is expected to be completed sometime later this year. Allotment of the coal block happened in June 2021, and the projected investment is around ₹2,700 crore.