Business

Steel producers oppose regulator

NEW DELHI: Even as soaring steel prices have contributed in a large measure to the Wholesale Price Index-based inflation rate, primary steel producers here criticised the Ministry for suggesting the need for a regulator for the sector as they felt that it would be a retrograde step and would “put the manufacturers between two prongs of a pincer”. In a letter to Prime Minister Manmohan Singh, Indian Steel Alliance (ISA) chief Moosa Raza said: “While steel manufacturers shared the Government’s concern about the current price situation, any attempt to regulate market forces operating on steel prices disregarding root causes is a retrograde step and will adversely affect growth of the industry.”

ISA’s counter to the Steel Ministry’s recommendation has come barely a day after Steel Minister Ram Vilas Paswan requested the Prime Minister to clamp an export duty on steel, lift the import duty and also withdraw the DEPB benefits that are now available to steel manufacturers so as to contain prices of the core construction material. Mr. Raza argued that the industry’s input costs had soared to unprecedented levels, much beyond the capacity of producers to absorb the hit. Spot prices of iron ore, he said, had increased from $50 to $150 a tonne, while the prices of scrap had surged to $500. “Even the state-owned NMDC has raised contract prices by 50 per cent in the middle of last year. Coke from China has hit the ceiling with a price of $523,” he said.

“In the light of this, any talk of regulating prices will tantamount to putting the steel manufacturers between two prongs of a pincer,” Mr. Raza said. For, while the “unabsorbable cost push” would compromise producer margins, a controlled or regulated regime would compromise the survival of steel makers, he said.

Besides, a regulator, at best, could only regulate prices at the producer’s level while there were thousands of intermediaries in the supply chain. Such a step, therefore, would only encourage corruption among inspecting agencies, he said.

“Moreover, the Government should keep in mind that any proposal to appoint a regulator will open a Pandora’s Box and there will be many demands to appoint a regulator for other commodities. We should not place ourselves in a situation where we go back to a controlled regime,” the ISA chief said in his letter to Dr. Singh.

The ISA letter went on to say: “Many investors are in the process of acquiring land, machinery and equipment and signing MoUs with the State governments. Any wrong signal at this stage, especially when the stock market is tumbling daily, would dampen the zeal of the investors to go in for expansion and hamper the growth of the industry… We, therefore, earnestly appeal to you not to take any steps, which will adversely impact the existing steel capacity in India and dampen its growth.”

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