New Delhi, May 9: The clampdown on steel and cement makers will lead to a reduction in inflation, if the government takes more follow-up actions.
Primary steel producers today asked the government to rein in secondary producers for the benefit of consumers.
Cement manufacturers have demanded changes in the tax structure, which would reduce prices.
Bowing to government pressure, steel firms had reduced prices by Rs 4,000 per tonne this week. Yesterday, the government told cement manufacturers to check prices or face the consequences. Hours after the government ultimatum, leading cement player ACC said it would freeze prices for the next few months.
We are in the process of persuading the cement companies to roll back prices. If that succeeds, that will be an administrative step, finance minister P. Chidambaram told reporters after the meeting of the cabinet committee of economic affairs.
Sources in the cement industry said as input cost had gone up substantially in the last one year, companies could only cut prices if the government reduced the excise duty. A government official said it could consider a cut in the excise duty on cement after manufacturers agreed to cut prices. The commerce ministry has already submitted a proposal to the finance ministry to reduce taxes.
Primary steel producers are not demanding any tax relief, attacking secondary producers instead.
In a representation to Prime Minister Manmohan Singh, they asked the government to discipline secondary producers to ensure lower prices for consumers.
Unless an appropriate mechanism is evolved, the benefit of lower prices may not get passed on to the ultimate consumers, said the representation signed by Steel Authority of India Limited, Essar, Tata Steel, Ispat, Rashtriya Ispat Nigam Limited, JSW Steel and Jindal Steel and Power Limited.
It is difficult to implement price discipline for this sector as there is a large number of small players involved. This may result in a situation whereby primary steel producers prices may be lower than those of secondary producers, the producers said. Of the 55 million tonnes of steel produced in the country, 20 million tonnes come from secondary producers.
They sought priority in the allocation of iron ore, coal mines and natural gas, besides the renewal of existing leases and the grant of infrastructure status to existing and upcoming capacities. This was necessary to offset the steep rise in the cost of iron ore, coke, metcoke and other inputs.
According to the producers, international coking coal prices have shot up 210 per cent, while ore prices have spiralled up by $40 per tonne, putting an additional financial burden of about Rs 10,500 per tonne.