CHAIRMAN's DESK

The main issue agitating the consumers in the steel industry is the rising prices of steel items. Consumers fail to understand why the government cannot intervene to contain these prices, which are now at an all time high. The government has been reiterating that in a decontrolled and liberalised environment, it is not possible for government to directly intervene for controlling prices but there are instruments, which can be used to stabilise prices such as reduction in customs duty, excise duty and ensuring larger availability to the domestic sector. All these instruments have been activated in the recent past but the hard fact is that international prices have continued to rise and our domestic prices have also risen in tandem with international prices.

There are allegations that major steel companies are making wind fall profits and some even allege excessive profiteering; but to be fair to the steel companies, they have gone through a prolonged period of recession from 1998-2001 when they incurred huge losses. At that stage the government could do little to help revive their fortunes. Now that they are making money and recovering past losses, there is hope that this revival will bring in its wake a huge plough back of funds for expansion of the industry and this is bound to have a positive ripple effect for the economy as a whole.

Nevertheless, the consumers' concerns are legitimate and to a large extent it is for the steel majors to exercise a sense of responsibility and bring down prices to a reasonable level. Pricing is not a one-way street and the producers need to extend the required goodwill to the consumers. Hence, it is for both parties to evolve a mechanism of constant dialogue and consultation so that price determination becomes a joint effort of both the consumers and the producers. Steel majors have to make a convincing case for higher prices to the consumers so that government intervention through various fiscal and non-fiscal measures can be kept to a minimum.

It is difficult to say how long this situation will last because Chinese demand and international growth continues to remain firm. However, domestic demand is also increasing and in the ultimate analysis the solution lies in increased supply of iron and steel materials to the local market. This increase in supply may take time but it is the only way to ensure that not only does the economy grow, but prices are contained at reasonable levels.

( J P Singh Joint Secretary, Ministry of Steel & Chairman, JPC)
(This is excerpted from JPC Bulletin July' 04)