Steps taken to tackle the rise in steel price

New Delhi, May 29 : There has been an up-trend in the domestic steel prices since 2006-07 and the trend accentuated since January this year.

In between January and April this year the price of pig iron went up by more than 70 per cent, construction steel like TMT and wire rods went up by more than 36 per cent and HR coils went up by more than 40 per cent.

Rise in raw material prices, strong demand in the international and domestic market and up-trend in the global steel prices have been some of the reasons cited by the industry for increase in the steel prices in the domestic market.

The mismatch in demand and supply is considered to be the main reason on the demand side for the rise in steel prices.

The Minister for Steel, Chemicals and Fertiliser Ram Vilas Paswan convened a meeting with major steel producers on February 14 and during the interaction made an appeal to review their last round of rise in price.

In response to the appeal steel producers like SAIL, Tata Steel and Jindal Steel and Power rolled back prices by Rs. 1000 per tonne for TMT, rounds and bars and Rs. 500 per tonne for other steel products.

However, with no abatement in sight in raw materials prices the steel prices have again gone up in March. The prices continued to rise. Paswan held discussion with all major steel investors including Arcellor-Mittal, POSCO, Tata Steel, Essar, Ispat and also Steel Authority of India Limited (SAIL), RINL on March 3 to explore the possibility of expediting the ongoing as well as envisaged steel projects.

The Government continued its dialogue and extensive discussions were again held with major steel producers, secondary steel producers and iron ore producers separately on April 2-3 to rein the rising steel prices and its contribution to the inflation in the economy.

As a result of these deliberations, price of different long products, which includes bars, rods and structurals, used by even the common man for housing, came down in the range of Rs. 4000-5000 per tonne during March 25 to April 12.

The Government also took various fiscal and other measures for stabilizing the steel prices like exempting pig iron, non alloy steel and steel making inputs like zinc, ferro-alloys and metcoke from customs duty; withdrawing DEPB benefits on export of various categories of steel products and bringing back railway freight on iron ore from classification 180 to 170 for domestic steel producers.

In order to assess the situations arising out of the rising steel prices, the Ministry of Steel held discussions with major steel producers and secondary steel producers, separately, on April 2 and April 3 respectively.

Another round of discussion with iron ore producers was held jointly by Secretary (Steel) and Secretary (Commerce) on May 1. Secretary (MSME) was also present during the discussion with major producers on May 2.

The following are the gist of the deliberations:

(i) Steel producers agreed to exercise restraint on export of steel products;

(ii) Rashtriya Ispat Nigam Limited and Tata Steel agreed to roll back the prices of long products by Rs. 2000 per tonne;

(iii) The steel producers agreed to cut back the price of galvanized corrugated (GC) sheets by Rs. 500 per tonne.

(iv) The major producers agreed on a transparent pricing system through regular updation in their website.

(v) The major producers agreed to increase allocation of steel to small and medium enterprise through the SSICs and NSIC, by 20 per cent from 4.9 lakh tonnes to six lakh tonnes for 2008-09.

(vi) In addition to existing rebate of Rs. 550 per tonne provided out of Steel Development Fund (SDF), Rs. 400 per tonne of steel delivered to the SMEs through SSICs and NSIC will be borne by the producers towards defraying the cost of transportation to SMEs.

(vii) The steel producers agreed to enter price contracts for deliveries to SMEs for at least three months and directly service even smaller quantities to SMEs.

(viii) Similarly, the secondary producers also agreed to pass on any reduction in duty and taxes announced by the Government, to the customers. The Secretary producers also agreed to cut the prices of bars and rods.

(ix) The iron ore producers agreed to consider the reduction in iron ore prices and later informed about a reduction of the spot price of iron ore by Rs. 200 to Rs. 300 effective from second weeks of April 2008.

The CEOs of major steel producing companies, namely, SAIL, Tata Steel, RINL, JSW, Essar Steel, Ispat Industries Limited and representative of Jindal Steel and Power Limited met the Prime Minister Manmohan Singh on May 7.

They shared the Government's concern regarding the inflationary situation in the country and in accordance with the Prime Minister's advice to contain prices, decided to take the following measures, with immediate effect:

* Those producers, who have increased the prices in April, would reduce the prices of flat products by Rs. 4000 per tonne. In addition, prices of re-bars and structurals where no increase was affected in April-May'08 would also be reduced by Rs. 2000 per tonne.

* These reductions will be applicable for all steel that gets consumed in India either directly or after further processing.

* The Steel Producers will hold these prices for the next three months.

* In May, the Government imposed 15 per cent export duty on semi-finished products and hot rolled coils and sheet, ten per cent export duty on cold rolled coils and sheets and pipes, tubes and five per cent export duty on galvanized steel in coil and sheet form in order to further curtail rising prices and increase supply of steel in the domestic market.

ANI