The government is contemplating a ban on futures trading in iron and steel. This will be in addition to a host of tax incentives to bring down the price of steel in the country.
The rise in steel prices had contributed around 25 per cent to the recent jump in the wholesale inflation rate, a government official said.
In addition, the government is likely to ban futures trading in almost all major farm goods. A source in the government said steel might also be classified as an essential commodity. Steel was taken off the list last year.
Sources said the finance ministry representative had observed during the latest inter-ministerial meeting on inflation last week that steel contributed to 25 per cent of the recent inflation in the country.
Besides banning futures trade, the government is lining up a host of fiscal incentives for steel producers. These include lowering or removing the import duty on mild steel and raw material from 5 per cent to nil, and reduction of the excise duty on all steel items from 14 per cent to 8 per cent.
The finance ministry has, however, argued that to make up for the tax cuts “it is desirable to mop up additional funds from revenues generating sectors such as iron ore export”.
Allaying fears of the mining and commerce ministries that raising the export duty would hurt the mining industry, the finance ministry observed that “in spite of the imposition of an export duty on iron ore last year, there is no reduction in the volume of exports. On the other hand, revenue collection from iron ore exports has shown substantial improvement”.