The Telegraph
Since 1st March, 1999
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Steel price hike in the works

Calcutta, March 28: Steelmakers appear to be bracing for a showdown with an inflation-spooked government by raising prices soon.

Industry executives from the public and private sectors indicated that there was a case for a Rs 1,000 to Rs 2,500 per tonne increase in various product categories and a decision could be taken by the weekend.

Steel companies generally take a call on prices on the first day of every month. In March, they had rolled back prices voluntarily after the Centre came down heavily on cement companies for raising prices.

However, the cement companies stood firm and did not yield to the government pressure. Steelmakers might have been cowed in early March, but they seem to be ready to take on the Centre this time like their counterparts in the cement industry.

In Budget 2007, finance minister P. Chidambaram had imposed an additional excise duty of Rs 200 on a 50-kg cement bag sold at more than Rs 190. At the same time, he reduced the duty by Rs 50 in case the bag sold at less than Rs 190.

Instead of buckling under pressure and bringing down prices, cement makers passed on the additional burden of excise duty to consumers by raising prices.

The finance and commerce ministers met cement manufacturers several times but they refused to relent.

Emboldened by the cement makers’ stand, steel companies now want to test the waters. “We are not sure what the government’s reaction will be. But the mood is certainly in favour of a hike,” a PSU steel executive told The Telegraph.

Landed prices of imported steel is on an average $30 higher than domestic products.

On top of that, international steel prices are set to rise by another $30 to $50 from April onwards. “There can be a case for Rs 1,000 to Rs 2,500 per tonne increase,” a steel industry executive said.

In some product categories, the price differential is as high as Rs 3,000 a tonne.

However, steel companies could settle for a Rs 1,000-1,500 increase so as not to irk the government.

Incidentally, steel secretary R.S. Pandey had said steel companies rolled back prices keeping in mind the government’s concern over inflationary trends in the economy.

After meeting the CEOs of steel companies where they announced a rollback, Pandey had said the companies’ profitability would not be affected by the roll back.

Internationally, steel prices are ruling between $610 and $650 a tonne across various continents. In India, landed prices are calculated after adding 5 per cent import duty.

About a year back, steel companies were lobbying for increasing import duty following heavy imports from CIS countries.

“The user industry took advantage of cheap imports then. Now that international prices are higher, why should we not raise prices,” a steel industry executive argued. Some sections within the industry also say they would consider an export option if such price distortion continues.

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