Prasada's first act after taking charge was a visit to SAIL's Bhilai steel plant to understand the process of steel production. He talks to Ajay Modi about his views on the sector, its prospects and challenges.
Was the steel portfolio given to you by choice?
No. It has been given to me by my leaders, UPA Chairperson Sonia Gandhi and Prime Minister Manmohan Singh. It is an assignment for me and I need to perform and live up to the expectations of my leaders.
Finance Minister P Chidambaram recently accused the steel companies of cartelisation. Do you subscribe to his views?
The finance minister must have had something in mind when he spoke about cartelisation in the sector. We cannot say, for sure, whether or not there is cartelisation.
However, there is an indication towards some kind of understanding among certain companies so far as pricing is concerned. In the recent price change, three steel companies announced a similar price hike on the same day.
How far do you consider steel responsible for recent spurt in inflation?
There is some contribution of rising steel prices in inflation since the commodity (together with iron) has a weight of 3.64 per cent in the wholesale price index. However, if one says that inflation is totally because of steel, it would be an over-statement.
In a market economy, pricing is entirely guided by the demand-supply equation. However, the government has lately been asking companies to reduce prices. Do you see this as a positive gesture?
It is a deregulated sector but at the same time monopolistic tendencies and arbitrary pricing cannot be tolerated. Any price increase should be proportionate to the rise in raw material prices.
Unfortunately, price increase has been much more than the input cost-push at times. It is normal for companies to make profits but it should not come from arbitrary pricing.
What are the efforts under consideration of the government to soften steel prices?
We are considering options like an import duty-cut and a reduction in Excise duty. Unnecessary hedging and speculation is also contributing to the price rise. My personal opinion is that futures trading in steel should be suspended for a temporary period.
What is the primary reason for the rise in steel prices?
The whole problem of price rise is emerging due to a gap between demand and supply, in addition to the rising cost of inputs such as iron ore and coking coal.
While the demand is growing at 13 per cent, the supply is increasing only at 6 per cent, leading to a gap. Our aim is to increase capacity so that there is no pressure on the demand side. While today, there is a shortage of 2-3 million tonnes, we expect a surplus situation by 2011-12 after the announced capacity additions take place.
New capacities often face time overruns owing to procedural delays. Is the ministry taking efforts to minimise the delays?
The delay happens due to involvement of numerous ministries at the central and the state level. But this cannot be skipped since every department and ministry needs to take care of its concerns. We have formed an inter-ministerial group to coordinate and facilitate setting up of new capacities.
Prices of the finished product (steel) can only come down if raw material is available to producers at a cheaper rate. Is there any attempt to ensure this?
We support all moves to retain high-grade iron ore within the country since it is a limited resource. By restricting its export, we can ensure its availability to the domestic producers at a lower rate.
What would be your priorities as a steel minister?
My aim would be to bring down prices and at the same time ensure capacity additions. The industry should expand at a pace sufficient to meet the growing consumption. Encouragement will be given to new and green technologies for steel production.
The per capita consumption of steel in the country is about 46 kg against the world average of 150 kg and the developed country average of 400 kg. Efforts would be taken to increase consumption and ensure adequate availability at the same time.
