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CCP meet postponed on price rise issues

CCP meet postponed on price rise issues
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First Published: Tue, Apr 15 2008. 03 33 PM IST
Updated: Tue, Apr 15 2008. 03 33 PM IST
New Delhi: Amid sharp differences between ministries of Commerce and Finance over measures to control spiralling steel prices, the government has postponed the meeting of Cabinet Committee on Prices (CCP).
The CCP was scheduled to meet on Tuesday to delve on measures including imposing an export duty and lowering excise on steel to check prices.
According to sources, the meeting has been postponed as the Finance Ministry is not in favour of reducing excise duty on steel fearing loss of revenue.
The Finance Ministry, sources said, is of the view that duty alone will not be able to check rising prices of steel as domestic prices are largely influenced by the international prices.
There was a proposal from the steel makers to ban export of iron ores to ensure cheaper raw material for domestic production and future expansion.
While pressure is mounting from certain quarters for either increasing the export duty or banning the iron ore shipments, the commerce ministry is against any such move, sources said.
Commerce and Industry Minister Kamal Nath had said last week that the iron ore variety, which is being exported, is not of use to domestic steelmakers and a ban would serve no purpose to contain inflation.
The iron ore prices have seen a sharp rise in the global market, leading to the revision of rate by the domestic miners.
The CCP was scheduled to meet in the backdrop of inflation rate touching a 40-month high of 7.41%, much above the Reserve Bank’s target of five per cent.
Refuting the contention of the steel industry that producers have their own captive coal and iron ore mines.
“Steel producers having captive mines are earning margins over 40%. The economies of captive supply spare them of any increased costs,” the FIMI said in a statement.
Arguing that over 25% steelmakers procure iron ore under long-term contracts at lower than spot prices, the Federation alleged that despite access to low cost raw materials, the Indian steel industry (especially the primary sector) has not passed the benefit to their consumers.
FIMI alleged that primary and secondary steelmakers also export iron ore fines directly and indirectly.
But the Indian Steel Alliance, the umbrella organisation of leading steel utilities, has made it clear that the input costs had shot up unimaginably high and beyond the capacity of steel makers to absorb the same.
It cited that spot prices of iron ore have increased to $150 per ton from $50 a ton, while scrap prices shot up to $500. “Steel prices have been rising mainly due to unhindered rise in input costs,” ISA President Moosa Raza said in a letter to the government.
The Alliance maintains that Indian steel prices are ruling at $800 a tonne, perhaps the lowest in the world, while international prices are over $1,000.
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First Published: Tue, Apr 15 2008. 03 33 PM IST