New Delhi: The government is finally ready to check the open defiance by steel companies, which again resorted to a price hike days after agreeing to keep rates unchanged.
In the latest round of increase in rates, which started on Tuesday evening, leading manufacturers levied a surcharge to cover higher costs including more expensive ore and coal as also higher rail freight tariffs. A committee of secretaries, which met on Wednesday, immediately swung into action on the steel price front, which has emerged as the latest headache in the government’s fight against runaway prices. The panel is learnt to have recommended a slew of measures including a ban on exports and excise duty cut to cool prices in the domestic market.
The industry proposal to cut duty from 14% to 8% was discussed along with a ban on ore exports, levying export taxes and making steel imports cheaper through duty cuts. The final decision will depend on Cabinet which is expected to discuss the proposals shortly. “This is open defiance. We don’t want to use any harsh measures but it seems they are pushing us to do so,” a top-ranking government source told TOI. Government sources also claimed that they had received feelers that the industry might not go ahead with the hike. Steel minister Ramvilas Paswan told TOI that the industry had assured price stability to steel secretary R S Pandey.
A steel company executive, however, chose a defiant tone, claiming that the industry had not given any assurances to the government on keeping prices constant during a meeting with steel secretary last week. “It was the government which said that prices should be maintained. We did not say that,” the executive said.
Over the last year, steel prices have shot up by nearly 35% with domestic players diverting supplies to international markets, where prices are spiralling. In addition, production is estimated to have gone up by around 5% while consumption is growing at nearly twice that rate.
Besides, some of the companies have not been affected by the rise in coal and iron ore prices since they use inputs from their captive mines.
Along with the steel companies, the government has also not used the complete array of instruments at its disposal to check exports estimated at 4-4.5 million tonnes during April-February 2007-08.
For instance, it tried to discourage exports through an end of tax refunds under the DEPB scheme but analysts said it was a half-hearted attempt as there were other export promotion schemes which can be tapped by companies.