Steel producers oppose regulator

MUMBAI: The Indian Steel Alliance (ISA), an association comprising SAIL, Tata Steel, Jindal, Essar and Ispat Industries, is averse to the idea of setting up a steel regulator. The association feels that any such move will impact the Indian steel industry and discourage investment. The solution to spiralling steel price, it feels, lies in creating new capacities and not capping prices. The ISA voiced its views after steel minister Ram Vilas Paswan proposed a regulator to rein in prices. The steel minister on Wednesday had asked the prime minister to impose export duty on steel, remove import duty and withdraw DEPB benefits for steel makers to contain prices.

The ISA, in turn, has attributed the price rise to higher raw material prices. Arguing its point, the association also said the current price of around $800 a tonne is among the lowest in the world. An affiliate to the Confederation of Indian Industries, the ISA on Thursday wrote a letter to the PM requesting him not to take any step towards setting up a regulator.

The letter, written by ISA president Moosa Raza, has no mention of Mr Paswan, possibly to avoid a direct confrontation with the steel minister. It said the association is perturbed by “media reports” on the proposal for an independent steel regulator. It asked the PM to encourage the industry through reduction of excise duty and allotment of iron ore mines.

Iron ore is the key raw material for production of steel. The iron ore deposit is estimated at approximately 23.59 billion tonnes, scattered across Jharkhand, Orissa, Chhattisgarh, Karnataka and Goa. However, allotment of ore is an issue in expanding the industry.

The letter explained at length on how the prices of raw materials have gone up in the recent past. Any regulator can, at best, regulate prices only at the manufacturers’ level. The intermediaries can not be brought under any regulator’s purview, the letter said. “Price regulation will only benefit these intermediaries and will encourage corruption among the inspecting agencies... Moreover, the government should keep in mind that any proposal to appoint a regulator would open a Pandora’s box and there will be many demands to appoint a regulator for other commodities. We should not place ourselves in a situation where we go back to a controlled regime,” said the letter.

The domestic steel industry is likely to see an investment of more than Rs 5 lakh crore, which is over six times the total money ploughed into the sector since independence. This would create a production capacity of over 240 million tonnes, nearly five times of what the country has now. The industry is expected to witness an addition of another 50 million tonne over its existing 48 million tonne in 2011-12.

According to a steel ministry document, 193 MoUs have been signed between investors and state governments as on July 1, 2007, to create an additional capacity of 242.9 mt at an investment of Rs 5,14,038 crore.