Steel set to get dearer

Steel majors are likely to pass on the four per cent increase in excise duty to the consumers.

Commenting on the finance minister's proposal to increase the excise duty on steel from eight per cent to twelve per cent, Sajjan Jindal, managing director Jindal Vijaynagar Steel said, prices will go up by four per cent.

"Most of the excise is modavtable but, the final consumer will get hurt" he said.

T Mukherjee, deputy managing director (steel), of Tata Steel, was more cautious in his comment.

He said, either the producers would raise prices or they would have to take a hit on net realisations and the market would be deciding factor.

However, Mukherjee added the market was buoyant at this juncture.

The steel industry felt the government would eventually revert to a 16 per cent duty on steel.

Jindal said, the duty was brought down to eight per cent only temporarily to bring down prices. "Eventually it will go upto 16 per cent next year" he said.

Prashant Ruia, managing director of Essar Steel, said reduction of import duty by 33 per cent on non-alloy steel was an unfortunate step. Steel appeared to be the only core sector industry which had been singled out for such harsh treatment.

"We hope the government will not hesitate to take care of the industry when it is hit by an adverse cycle which was the case as seen in the last five years," he commented.

Vinod Garg, director (marketing) of Ispat Industries, said, "When duty was reduced to eight per cent, the producers passed it on to the customers. It is now the customers turn to give it back to the producers."

Garg however, clarified whether prices would increase or not would be determined through a process of consultation with the customers.

He said the duty on import material has been brought down, which implied steel producers would have to become more cost competitive.

Excise duty apart, Mukherjee was disappointed with the budget proposal on the steel sector and the finance minister not addressing its issues adequately.

According to him, if a growth rate of eight per cent was to be achieved, it would require large quantities of steel. So, the budget should have dealt with specific measures to bring down the cost of production for the industry.

Mukherjee explained, infrastructure development should have been so drafted as to reduce the cost of production for the steel companies like logistics, roads, port, railways.

"We need fresh investment in the sector and at present it is not attractive enough" said Mukherjee.

He cited the example faced by the industry with regard to iron ore exports. "Last year we could not export iron ore because rakes were not available" said Mukherjee.

Steel picture

• Increase in excise duty from eight per cent to 12 per cent may push up prices by four per cent
• Industry disappointed by 33 per cent cut in import duty on non-alloy steel
• Customs duty cut on steel products by 5% may put pressure on margins