Steel producers lock horns with Paswan

Reacting to Union Minister for Steel Ram Vilas Paswan's letter to Prime Minister demanding a regulatory framework for the steel sector, the Indian Steel Alliance (ISA), a major association of domestic steel producers, has written to the PM, labelling the move a retrograde step, which would adversely impact the development and growth of the industry.

ISA president Moosa Raza said in the letter that any talk of regulating prices would tantamount to putting the steel manufacturers between two prongs of a pincer.

"On the one hand, the unabsorbable cost push would be compromising margins for the steel manufacturers, while on the other hand, a regulated regime would compromise its very survival," he said.

Raza pointed out that spot iron ore prices had gone up from $70 per tonne in April 2007 to $150 per tonne by March 2008 and the government-owned NMDC raised contract prices by 50 per cent in the middle of the year.

Scrap prices increased to $500 a tonne, while coking coal prices increased from $107 a tonne to $320. Coke from China has gone through the roof to $523 a tonne.

"The price of gas, a government-controlled commodity has gone up from an average of $4/mmbtu to $10/mmbtu. All these have resulted in an incremental rise in the cost of manufacturing of steel by $330 per tonne for major inputs alone," mentioned Raza.

Also, he explained that the benefits of price regulation would not percolate to the consumer and would only help the intermediaries and inspecting agencies.

Raza's letter was in response to a letter from the Union minister for steel, chemicals and fertilisers, Ram Vilas Paswan to the Prime Minister on Wednesday suggesting a slew of measures to rein in increasing prices.

Paswan recommended that a 10 per cent export duty be slapped on TMT bars, semis and hot rolled products and two per cent on other products. He also suggested that import duty on steel should be removed and an export duty of 15 per cent on iron ore.

Sources said, in a separate note, Paswan put forward a regulatory framework and the way it could function.

Paswan mentioned earlier this week that the Prime Minister had expressed concern over rising steel prices and the increase was not proportional to input cost rises.

The debate on steel prices came in the wake of price hikes from January. In January, the steel companies hiked prices by Rs 600-900 per ton and then Rs 2,500 per ton in February.

However, at the behest of the steel minister, a partial rollback was announced in February. In March, producers increased prices by Rs 3,000-5,500 per ton, on an average.