|Chidambaram at the meeting (AFP)
New Delhi, March 1: Missed catch yesterday, poor timing today.
Finance minister P. Chidambaram today appealed to corporate India to “hold the price line” but two key industries had by then activated a “customary” process to raise rates.
Manufacturers of both cement and steel — two components that drive construction and can have a cascading effect — increased prices a day after Chidambaram unveiled a budget that the government is pitching as an inflation-buster.
The price changes started trickling out a few hours after Chidambaram told a post-budget meeting with business chambers: “I will urge the industry to hold the price line. I will ask them to cooperate in the fight against inflation.”
News of the cement price rise — by Rs 10-12 per 50-kg bag — broke first. The finance minister had yesterday raised the excise duty on cement priced above Rs 190 a bag by Rs 200 per tonne. The duty on cheaper cement bags was cut but few companies sell cement at Rs 190 a bag.
Next was steel’s turn — many raised the price of hot-rolled coils by at least Rs 1,000 a tonne.
Keen to scotch a possible impression that the industry had defied the minister, a steelmaker said it is a tradition to revise prices for the whole month on the first day of every month. The eagerness to clear the air was all the more striking since it came 24 hours after many business leaders rued the opportunity missed by Chidambaram to make use of the upbeat economy and think out of the box.
“It’s not as if we were trying to embarrass the minister on this very day. It just so happens that we and many other core sector industries traditionally decide on the prices before the month ends and use the new price reference from the first of a month,” a steel executive said.
But he chose not to comment, asked whether the industry would have held the price line had Chidambaram made the appeal yesterday itself, immediately after presenting the budget.
Cement manufacturers said they had little option but to pass the duty hike to the consumer. “Excise duty has been raised for cement priced above Rs 190 and companies have no option but to raise prices,” said H.M. Bangur, the vice-president of the Cement Manufacturers’ Association.
Steelmakers did not have cause for concern on that count. Besides, export duty was slapped on iron ore, which will make the scarce raw material more easily available to domestic steelmakers. Import levy on coking coal, used as raw material in steel plants, was also abolished.
Yet, most steelmakers —Tata Steel, Essar and Ispat — decided to raise hot-rolled coil prices, blaming rising input costs and global trends.
But the ban on forward trading in grain — imposed after the Left stepped up heat to rein in inflation now hovering around 6.6 per cent — did show some impact today. Wheat prices have started to fall.