Rising steel prices put the steel ministry in a fix
Financial Express

Rising steel prices have put the government in a classic catch-22 situation. Much as it would like to check prices—for their inflationary influence and impact on prices of end-consumer products like auto and durables—it can do precious little within the regulatory framework, which lets firms raise prices based on market movements.

In 2004, the year elections were contested, the government had tried to check steel prices by reducing import duties, but this time, it does not have much elbowroom here since duties are at a low of 5%. Though last year, the steel ministry had formed a price monitoring committee, under a joint secretary with industry representation, it has only an advisory role. The committee just serves as a forum for government-industry interaction, where the Companies justify price hikes or asks for concessions, which is not within its purview.
Sources said the steel ministry is planning to render teeth to the price monitoring committee but support is not coming from other wings of the government, which feel that prices should be market-determined. Further, the steel ministry can’t even stop state-owned firms like the Steel Authority of India Ltd (Sail) and Rashtriya Ispat Nigam Ltd (RINL) from raising prices as these two firms control only about 30% of the market.

An old proposal for putting a steel regulator has also failed to pass muster as the government has been advised that it is not feasible for the sector to have one. The government has been advised that a regulator can there be only in areas where the product or service is non-storable in nature. Steel can be stored and therefore does not fall in the category. Telecom services or power supply—the two sectors where there are regulators —are non-storbale. Further, the product or services should be non-exportable for being regulated. Steel is exportable whereas telecom and power are not. Regulators are required in areas where there’s a monopoly. There’s no monopoly in steel. In power and telecom, state-owned Companies were having and continue to have an edge over newer private players.

Regulators are needed in areas where there’s fluctuating demand. Like in power there’s fluctuation between peak and off-peak hours. There’s no such scene in case of steel. In fact, the production of steel is higher than the consumption and there’s surplus available.
Regulators are required where the service is considered essential in nature. Power and telecom are essential services. Steel is not as there are several substitutes available like plastic and cement.
Steel producers like SAIL, Tata Steel and JSW Steel Ltd have raised prices by around Rs 2,500 per tonne early March and between Rs 1,500 and Rs 2,000 during February. Though the prices, in March, were brought down by Rs 500 to Rs 1,000 in response to steel minister Ram Vilas Paswan’s appeal.

Steel price committee may get more teeth
Indian Express

Not a regulator yet To study individual hikes more closely
The ministry of steel is considering increasing the powers of the price monitoring committee to enable it to check steel prices more effectively. Last week steel minister Ramvilas Paswan had cautioned steel companies to refrain from increasing steel prices arbitrarily and pass on the benefits of the 2 per cent CENVAT duty cut in the union budget. The industry, however, defied the minister raising prices of flat products and hot rolled coils by Rs 2,000-3,000 per tonne and Paswan is now planning to follow up his words with action.
“There is a need to check prices of steel and we are considering making the price monitoring committee more powerful,” said a steel ministry official. “The intention is not to micro manage the industry but to ensure accountability and fair play especially in cases where companies have their own means of raw materials.”

While the committee which was set up last year may not have powers to levy penalties on erring companies, it can call upon individual players and seek justification of any price hike. In its current format the committee regularly hosts the industry as a whole and discuses steel pricing trends.
“Most of the steel makers cite rising raw material prices and international trends for hiking prices. However what is often not taken into account is the fact that some of our big steel producers have captive raw material reserves and are not that vulnerable or hard pressed to increase prices,” the official stated.

Paswan had earlier stated that a mechanism needs to be evolved to ensure complete transparency in pricing and specific raw material prices need to be studied. “It is true that coking coal and iron ore prices have gone up in the recent past but there should be discussion with the monitoring committee before a hike is announced,” he had said at a steel and mining summit organised by Indian Chamber of Commerce last week. “Raw material price increases need to be studied and a ratio needs to be worked out on how much should be passed on.”