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Steel makers to cut prices

business Updated: May 07, 2008 21:19 IST
Gaurav Choudhury

The country’s steel makers on Wednesday agreed to reduce prices of steel by up to Rs 4000 per tonne for the next three months but sought reduction in prices of iron ore supplied by government-run companies.

“We have offered to reduce prices of flat products by Rs 4,000 per tonne and those of reinforcement bars and structurals by Rs 2,000 a tonne,” said a top executive at a leading steel company.

The decision to reduce prices was taken after top officials of the country’s leading steel companies met Prime Minister Manmohan Singh here on Wednesday.

"This means the (input) costs in sectors that excessively use steel would come down," said TK Bhowmik, Chief Economist at Reliance Industries. "Although individually, steel doesn't have a very high weightage in the wholesale price index, it is a very critical input in several industries, including automobiles and consumer durables," he said.

Steel prices have come under scrutiny following a spike in inflation in recent months, which has worried the government and prompted protests from consumers and opposition parties. Steel, a key intermediate, contributes more about 21 per cent to the overall increase in prices in the Indian context, according to Finance Minister P Chidambaram.

Steel prices has risen sharply in the recent past, primarily because of domestic shortages and a surge in prices in the global markets. Domestic steel consumption is growing at the rate of 12.6 per cent with a domestic supply deficit of around 6.5 million tonnes.

Among those who met the Prime Minister on Wednesday included Tata Steel Managing Director B Muthuraman, JSW Steel Vice Chairman and Managing Director Sajjan Jindal, SAIL Chairman Sushil Kumar Roongta, Ispat Industries Vice Chairman and Managing Director Vinod Kumar Mittal, Essar Steel Chief Shashi Ruia and RINL Chairman and Managing Director PK Bishnoi.

The steel manufacturers have also sought a roll back in prices of iron ore supplied by government-owned National Mineral Development Corporation (NMDC) with retrospective effect from October 2007.

A senior industry official, who spoke on condition of anonymity, said the producers have offered to reduce prices for three months. “The reduced prices will be applicable only for new orders and not for existing contracts,” he said.