New Delhi: Even as steel manufacturers and the government debate over issues related to pricing of steel, it is ironical to note that retail consumers of steel may still not get the same at the intended price. Even if the government was to control steel prices in the domestic market, it may only lead to further hoarding and black marketing of the commodity.
Says Neelkanth Mishra, an analyst with financial services group Credit Suisse, “If steel prices in India remain below the international prices, it may potentially lead to black marketing. People could buy from the domestic market at lower prices and sell at higher prices elsewhere.”
Even now, the price of steel in India is Rs15,000 to Rs20,000 lower than international steel prices. They are also expected to remain firm for the next five to ten years on the back of demand from BRIC countries according to consulting firm McKinsey. In such a scenario, if new measures further widen the gap between domestic and international prices, it may just be the speculators and hoarders that benefit.
Mishra’s view may also well be the truth if one takes the events of the past few months into consideration. The steel industry manufacturers raised the price of steel by Rs5,000 to Rs40,000 per tonne (nearly 15%), in May this year. But with inflation touching double digit, they were asked by the Finance Ministry to roll prices back. The steel industry rolled prices back by Rs4000 and also promised to hold the same price level till August. The present price of steel in July stood at around Rs36,000 per tonne.
However, the prices in the retail market continued to rise and have risen by nearly 30% in the meanwhile. An independent house constructor, C.P. Sharma says that steel has been especially rising since the past three months. Real estate developer and COO of Parsvnath DP Dhaka too agreed with Sharma. “Steel prices have increased in the past few months and have been affecting his construction cost,” he said.
The Minister for Steel, Ram Vilas Paswan, blames the same on the middlemen and distributors. “The steel manufacturers have kept their promise by rolling back prices and holding the same for the past three months, but middlemen and distributors have not been performing their roles. They have not passed this decrease to consumers and have indeed been charging even more from them,” he says. He has also warned steel retailers and distributors that if they charged higher prices, they will be persecuted.
However, steel retailing in Indian continues to be largely unorganised. Tata Steel managing director B Muthuraman points out that the large steel producers just account for 30% of the retail steel market. It will be indeed difficult to keep a tab on such a loosely knit group.