| About 11 metric tonnes of non-flat steel, mainly bars and rods and structural steel, is consumed by the construction sector for use in infrastructure projects.
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| Since January this year, prices have increased by 32.33 per cent in case of bars and rods and 25.33 per cent in case of steel structurals. In absolute terms, prices have increased by about Rs 3,500-5,500 per tonne for bars and rods.
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| The Construction Federation of India (CFI) has brought up this issue of rising non-flat steel prices to the notice of Prime Minister Atal Bihari Bajpayee.
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| CFI chairman Ajit Gulabchand, in a letter to the prime minister, said the infrastructure modernisation programme of the government stands threatened by the steep rise in steel prices.
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| The most affected are the nuclear power plants, which use steel in large quantities, Gulabchand said.
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| The hike in the price will raise the cost of the Tenth Plan infrastructure projects by about Rs 11,000 crore or more, the letter said, adding: “The problem is compounded by the fact that steel imports are subject to an effective duty of 50.31 per cent, which makes the landed cost of steel about Rs 3,500 per tonne higher than domestic steel. Non-tariff import barriers exist in the form of mandatory quality standards and cumbersome registration procedure, which make imports difficult.
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| The CFI has urged the government to set up a task force to review the price escalation. "The overall impact of the situation is severe on the construction companies. With an additional burden of Rs 4,800-6,800 crore, about 40-60 per cent of the industry's margin is likely to be wiped out. The Government is also faced with steep escalation cost. Urgent measures are required to remedy the situation," the letter said.
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| "The immediate need is to improve domestic supply through higher imports. This would require liberalizing imports so that prices soften. Imports of steel may therefore be permitted at zero or marginal duty of 5 per cent. It may be clarified that the steel industry with good exports prospects are not likely to be affected and in any case a shortage of half a million tonne is anticipated in the current year,” it added. |
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