Steel companies may hike prices

"The government is not in favour of intervening in steel prices. We do not want industry to incur losses. However, it is our duty to ensure that consumers do not suffer as a result of an arbitrary price hike, which is disproportionate to the increase in raw material prices", steel minister Ram Vilas Paswan told reporters at the Indian Steel Conclave, organised jointly by FICCI and the steel ministry. 

 

"The government has noted with concern that certain dealers have been selling steel products at a rate higher than the market price taking advantage of the demand situation. "We will take up very severely with such manipulations. We have already directed the public steel companies to keep a strict watch on such malpractices. I request the other producers to keep a similar watch on their retail and distribution network," said Paswan.

Steel prices have moved up by 40-50 per cent since January owing to a rise in prices of raw materials like iron-ore, coal and freight charges. "The unprecedented jump in raw material prices coupled with the robust demand has led to an all-time high steel prices", said B Muthuraman, managing director of Tata Steel, the country's largest steel producer in the private sector.

Muthuraman added that while the primary steel producers agreed to cut prices by Rs 4,000 a tonne in May, no positive and corresponding action was seen from the processing and downstream industries. "Final product prices, which actually impact inflation, has not come down", he said.

The industry is finding itself in an unusual situation where the cost of imported steel is about Rs 15,000-20,000 a tonne more than the domestic price. "It looks that the government's policy is to encourage a better price to companies based outside the country", he said.

Because of its inability to pass on the price increase, the return on investment for steel companies in 2008-09 would be lower than in 2007-08. "We will see that at the end of this year", said Muthuraman.