The government is mulling to ban futures trading in iron and steel for six months, in order to check inflation and arrest steel prices, that rose by over Rs 8,000 per tonne in the last five months."With a view to bring stability in steel prices it is proposed that futures trading in iron and steel be suspended, for a period of six months, as the same is fueling speculation in steel prices," a senior government official told PTI.Currently, steel is traded on two commodity bourses the National Commodity and Derivatives Exchange (NCDEX) and the Multi Commodity Exchange (MCX).Although there is no concrete evidence to prove that futures trading has catapulted a rise in inflation, however, the government believes that the metal rates could be "stabilised" if trade is suspended on commodity bourses.The WPI-based inflation touched 7.41 per cent on March 29.Last year, the government had banned futures trading in wheat, rice, tur and urad to check price rise.Jittery at steel prices spiraling out of control, Steel Ministry Ram Vilas Paswan has sought a ban on export of finished steel to ensure availability of the metal for 'aam aadmi' (common man).Besides, Paswan has also asked Prime Minister Manmohan Singh to consider a slew of steps including setting up of a regulator, abolition of import duties, imposition of 10 per cent export duty and reclassifying of steel as an essential commodity.Acting on the ministry's recommendations, the government withdrew the DEPB ( Duty Entitlement Pass Book) benefits on steel exports, which is likely to hit the bottom line of steel makers by about Rs 600 crore. However, the industry warned that the nation would lose foreign exchange of Rs 20,000 crore annually if exports are banned. Capacity expansions announced by major steel makers would be jeopardised as it would throttle their ambitions.The overall percentage of steel exports are not more than 6-8 per cent of total domestic production. "Would a total ban on the export of steel make steel available in significant quantities within the country to ease inflationary pressures?" Indian Steel Alliance President Moosa Raza said in a letter to the Prime Minister."A major part of exports of steel consists of products which do not have a domestic market or are surplus to domestic requirements. This material will become an immense idle inventory, adding to woes of the industry," he said.Commodity market experts said ban on futures trading in steel would hit hard on volumes of the exchanges, which are still in the nascent stage.
