The steel industry has assured the government it will hold steel prices for one month despite the increase in input costs and the pressure on margins. In turn Finance Minister P Chidambaram has said that the export duty of Rs 300 per tonne of iron ore, as proposed in the union budget 2007-08 will be retained.
"The industry has decided to hold the price at current level," said Sajjan Jindal vice chairman of JSW Steel, and senior vice president of Assocham, who led the high level delegation which met Chidambaram on Thursday. It included both private and public sector steel manufacturers.
The step will help to control inflation, since steel is a major item on the wholesale price index. "We have to support the government fight against inflation," said Jindal.
Sources in the industry said that the government had agreed to a quid pro quo on iron ore export duty. “The industry is facing rising input costs. The price of iron ore in the domestic market is certainly one of the main factors that affect steel prices,” said one of the members of the delegation.
Inflation declined to 6.39 per cent for the week ended March 24, after running at 6.46 per cent for three consecutive weeks, but it still remained much higher than the RBI's projection of 5-5.5 per cent for this financial year.
In order to control inflation, the government has already removed the import duty on cement. It is hoped that this will lead the domestic cement manufacturers to bring down prices or at least hold them for the present. Steel and cement are two crucial inputs for the construction industry, which is witnessing a phenomenal growth rate.
Industry experts feel that the both these commodities may witness a demand-supply gap, with the growth in demand soaring. Steel and cement industries are expanding their capacities but there will be a time lag before the projects they have begun are commissioned. In the interim, it would be difficult for the industry to hold back the price for long, they added.