Hot-rolled coil prices to rise by Rs 1000

STEEL SECTOR/ Nightmare begins for industry behemoths

Hot-rolled coil (HRC) prices are all set to rise by Rs 1,000 per tonne with finance minister Chidambaram having raised the excise duty on steel from eight per cent to 12 per cent. Prices have been stable at Rs 25,000 per tonne since end-February.

"When the excise duty was reduced from 16 per cent to eight per cent in early-March, the industry had passed on the entire benefit to customers. Similarly, the extra excise burden of four per cent will now be passed on to customers," said Moosa Raza, president, Indian Steel Alliance.

The ISA, an association of the country's leading HRC producers, including Tata Steel, SAIL, Ispat Industries, Essar Steel and Jindal Vijayanagar Steel, had been lobbying hard with the government to maintain the excise duty at eight per cent.

"Domestic prices would be affected by the rise in excise duty," said V S Jain, chairman, SAIL.

In another blow to HRC producers, Chidambaram has pruned the customs duty from 15 per cent to 10 per cent. Downstream users had been demanding such a cut on the ground that HRC had run into short supply in the country. "Though the industry will survive, we are not very happy," Raza added.

Adding that the higher excise duty will result in higher HRC prices, Sajjan Jindal, chairman and managing director, Jindal Iron & Steel, said, "The reduction in the import duty has come as a dampener for the industry. Although domestic steel companies have had a good run in the last year, the industry still needs a couple of years to become sound."

"The rise in excise duty with the reduction in customs will merely encourage low quality steel being dumped into India," said Shashi Ruia, chairman, Essar group, adding, "The finance minister has looked after all major aspects barring the requirements of quality steel manufacturers of the country."

The stock markets reacted sharply to the cut in customs and hike in excise. The prices of steel company shares fell "" Tata Steel fell from Rs 316.2 to Rs 296.35, Steel Authority of India Ltd from Rs 31.15 to Rs 27.2 and Essar Steel from Rs 17.25 to Rs 15 on the BSE.

Though downstream users welcomed the cut in customs duty, they complained that there was no differential between the duty on intermediates and that on finished products.

"We had asked for a five per cent differential between the two duties. This would have encouraged more value addition in the country," said S C Mathur, president of the Cold Rolled Steel Manufacturers' Association.