The Hindu : Government moves to check prices

Online edition of India's National Newspaper
Wednesday, Feb 25, 2004

Business

Business

Government moves to check prices

By Alok Mukerjee

NEW DELHI, FEB. 24. Moving quickly to check the rising domestic prices of steel on the eve of elections, the Government today unveiled a two-pronged strategy of making imports of steel and inputs used for its manufacture cheaper while simultaneously withdrawing some of the benefits accorded to steel exporters.

On the import side, the Government has announced an across-the-board import duty cut of five per cent in the case of metallurgical coke, pig iron and cast iron, all inputs required for steel production while lowering the duty on some finished products as well.

The duty on metallurgical coke has been reduced from 10 to 5 per cent, pig iron from 15 to 10 per cent and cast iron from 20 to 15 per cent. The duty cuts take effect from tonight.

At the same time, the decision has been taken to modify some of the incentives for steel exports by changing the rules regarding Duty Entitlement Pass Book scheme. Accordingly, steel producers exporting at preferential tariff rates to those countries with whom India has signed Preferential Trading Agreement (PTA) or Free Trade Agreement will now get DEPB benefits only to the extent of the duty paid and not a higher flat rate, as was the practice so far. This move follows steel exporters claiming DEPB benefits despite exporting the commodity at zero per cent under the PTA.

With the modification of the rules for claiming DEPB benefits, the Government expects that misuse of the scheme would be checked.

With lower exports, prices in the domestic market would also stabilise. The Government is understood to be examining the possibility of bringing down the overall DEPB rates for steel exports.

Hints about the likely official action to check domestic steel prices came from the Steel Minister, B. K. Tripathy, earlier in the day when he told media persons that the Government would be taking steps, including curbing exports, to stabilise domestic steel prices.

The customs duty cuts on steel and inputs used by the steel industry have been welcomed by the Confederation of Indian Industry which has now asked the Government to consider reduction in the excise duty on construction steel and products used by the rural sector. The demand is for reducing the current duty rate of 16 per cent to 8 per cent.

Reacting to the import duty reductions, a spokesman for the public sector steel major, the Steel Authority of India Limited (SAIL) said that the reductions would help stabilise the domestic steel prices which had seen fluctuations in recent times. "SAIL has been a domestic player and has taken steps to make steel available in the domestic market,'' the spokesman said.

Industry sources conceded that the duty cuts would have a marginal impact on domestic steel prices and would bring about stability. "International steel prices are still too high. So the duty cuts would have a marginal effect only but would definitely bring about some stability to the fluctuating prices,'' the sources said.

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