Facing flak from different quarters, steel manufacturers defend price hikes in letter to PMO

Facing flak from different quarters, including MSMEs and road transport and highways minister Nitin Gadakri for jacking up prices ‘exorbitantly’ over the last few months, steel makers have written to the prime minister’s office to ‘place the matter in the correct perspective’.

Highlighting the ‘compelling reasons’ for the price increases, the Indian Steel Association (ISA), the representative body of the domestic steel producers, has attributed the hikes to acute shortage of iron ore which led to a sharp rise in its prices, northward movement of steel prices in international markets with which Indian prices ‘move in sympathy’ and ‘subdued domestic steel production’.

Gadkari has been vocal against the steel firms for raising prices by 55% in the last six months. The minister had also written to the Prime Minister Narendra Modi seeking his intervention to arrest the trend. “Lowering the productivity and increasing the rate is not a good strategy,” Gadkari lambasted the steel industry at an Assocham event earlier this month.

In their letter to the principal secretary to the Prime Minister, ISA also said that crude steel production in November this fiscal was lower than the same month last year and overall, the production is down by 19% year-on-year. The fall in production is mainly due to the inability of the smaller steel producers to scale up output as they are facing the double whammy of high input costs and non-availability of iron ore.

Requesting the government to implement quick policy measures for easing the supply of iron ore, especially in Odisha, the ISA has urged the government to impose a temporary ban on iron ore export for a six-month period till the situation stabilises as it will help the domestic steel industry by increasing the availability of iron ore in the country.

“Due to the impact of the pandemic, when the production of iron ore is already under pressure, the government may take necessary steps to restrict direct exports of high-grade fines and lumps so that the curtailed export volumes can be serviced to the domestic steel industry as a priority,” ISA said.

Meanwhile, in their Budget recommendation, miners’ body Federation of Indian Mineral Industries (FIMI) on Tuesday suggested complete withdrawal of export duty, now at 30%, for exports of the raw material containing 62% iron as against 58% now, as higher duty has rendered exports unviable.

“Due to high incidence of export duty on iron ore, exports had sharply declined from 117.37 million tonne (MT) in 2019-10 to 36.62 MT in 2019-20. There is stockpile of 163 MT of iron ore at mine-heads as on March, 2020. Most of the stockpile is in the grade of 58% Fe to 61% Fe. Abolition of export duty will help in liquidating the huge stockpile and result in enhanced foreign exchange earnings besides more production of iron ore in the country,” FIMI said.