Indian steel makers agree to lower prices by 5-10 percent to fight inflation

Indian steel makers give in to government's demands despite seeing a cut in their profit margins

• IBTimes RSS
• Print
• E-Mail
• digg
• Del.icio.us

Bowing to the government pressure, leading Indian steel makers pledged that they would reduce prices of steel products by 5-10 percent. But the steel companies, in turn, urged that the government discourage iron ore exports and withdraw tax on steel exports.

"The steel producers committed themselves to reduce the prices of steep products and hold them for the next three months," Tata Steel, world's sixth largest steel maker said in a statement.

According to a statement released by the government, Tata Steel, state-run Steel Authority of India Ltd (SAIL), JSW Steel, Ispat Industries, Rashtriya Ispat Nigam Ltd (RINL) and Essar Steel, which together produce 60 percent of India's steel, gave the assurance after the top executives of the steel makers met Indian Prime Minister Dr. Manmohan Singh.

However, the reductions will be applicable only for those steel products that gets "consumed in India either directly or after processing," it said.

To fight inflation which has risen to a three and a half years high of 7.6 percent on the back of higher commodity prices, the government had levied export duties of 5-15 percent on various steel products in an effort to keep domestic prices down.

Despite appeals from Steel Minister Ram Vilas Paswan, most steel majors had increased prices by Rs.1,500-3,000 per tonne in April.

The steel makers had also hiked prices twice before that: in January by Rs.600-900 per tonne and in February by an average of Rs.2,500 per tonne.

In end-April, the government launched a crackdown on errant steel makers by slapping a 15 percent export tax on steel, cutting import taxes on mild and semi-finished steel to zero and removing a 14 percent countervailing duty on construction steel.

The government also forced Indian steel makers to dissolve their umbrella body - the Indian Steel Alliance (ISA) - fearing that the industry was indulging in cartelization.

However, the steel makers feel that inflation could be better controlled if the government withdraws the tax on steel exports and discourage iron ore exports by hiking the duties on them by 15-25 percent. They also suggested that allocation and renewal of iron ore and coal mines should be made for them on priority basis.

The rising prices of steel in India was only following the global trend, the steel makers said, adding that the rise in the costs of raw materials such as coal and iron ore over the past few years also led to the rise in steel prices.

Some steel makers also said that the steps taken by the government would not impact domestic prices but rather would hurt their profitability. According to Navin Jindal of Jindal Steel and Power Ltd, a cut in steel prices would hurt its profit margins. "But how much is a matter of calculation," he said.

The government statement said the authorities would look into the proposals of the steel makers.

Steel prices have risen by more than 40 percent globally during the past one year but surge in prices of inputs like iron ore and coking coal have put pressure on the profit margins of steel producers worldwide.