Steel framework

So is it back to the control raj of the 8217;60s, 8217;70s and 8217;80s? In this age of reform, what earthly reason does the union minister of steel, Ram Vilas Paswan, have to propose a National Steel Price Regulatory Commission? In an age when steel prices are determined more by the laws of demand and supply and there are significant private players in the country, apart of course from the state-owned Steel Authority of India and the Tata Iron and Steel Company, what is the point of the government stepping in to supervise the process? If the concern is about shoring up availability at stable prices, there is always the futures market to tap into.

In any case, does Paswan believe that a return to the good old era of control is feasible? Fears of regulation immediately impacted on the Sensex which shed 86.7 points on Monday as steel stocks took a battering. The present market trepidation comes at a time when the industry faces important challenges. No doubt, China8217;s voracious appetite for steel 8212; thanks to investments in infrastructure, the on-going auto boom and preparations for the Olympics in 2008 8212; continues to absorb much of the world8217;s exportable surpluses, including that of India8217;s. But the dragon8217;s insatiable demand has brought in its trail the problem of rising input costs. Supplies of metallurgical coking coal from China in particular have dried up 8212; affecting the operations of our state-owned steel plants which do not have captive raw material supplies unlike Tata Steel. Instead of regulation, the need is for such plants to acquire fresh sources of supply of coking coal from Australia and other markets. For private companies that do not produce steel from the blast furnace route, there is also a tightening of scrap supplies from the CIS countries. Sorting out the scarcity of raw materials warrants the government attention more rather than regulation per se.

Paswan, by suggesting such a step, appears to be under pressures exerted by the influential steel consumer industries who have been crying hoarse over the high prices of domestic steel lobbying aggressively for a duty cut from the existing level of 15 per cent to 5 per cent. Some of them have also been threatening to raise their prices due to costlier steel. Instead of regulation, a better course is for domestic steel producers and consumers to sit across the table and thrash out their differences. The government should make the steely resolve of sitting out on this one.