Miners' body FIMI has urged the government to introduce a mechanism to monitor the price and sale of domestic steel, which has witnessed a steep rise in recent months. According to the Federation of Indian Mineral Industries (FIMI), the hike in the prices of steel is leading to "windfall gains by few steel players" at the cost of the entire Indian economy, including upstream mining industry and downstream user industries.
"We request your urgent intervention for introducing a price monitoring and regulation mechanism for sale of steel by integrated steel producers, to ensure that there is no unreasonable hike in domestic steel prices due to any increase in international iron ore prices, since integrated steel players have got their own mines and not dependent on imported iron ore," FIMI Secretary General R K Sharma said in a letter to Prime Minister Narendra Modi.
He also urged the government for complete withdrawal of import duty on steel and stressed that the move will benefit the downstream industries and the citizens at large.
Subsequent to auction, the integrated steel players have now got their own iron-ore mining leases post March 31.
"Having secured sufficient raw material for their own steel plants, they are now taking the plea of high international iron-ore prices to hike steel prices in India, while they are not dependent on international iron-ore for making steel.
"This is despite the fact that 162 million tonnes of iron-ore... has been lying unused in the country for decades due to non-lifting of such ore by the steel industry," he said.
While the steel industry advocates and uses trade barriers (export duty on iron ore) to squeeze the mining industry, it advocates a free market for domestic sale of steel at par with international prices.
Consequently, the high price of steel in the country has deprived domestic consumers' common usage of steel and is the prime reason for the low per capita consumption of steel in India at 74 kgs, compared to 208 kgs globally.
Further, in all government procurement, there is a preference to domestically manufactured steel products at a price higher than good quality imported steel products. It means that for the sake of benefiting few steel producers, the exchequer and taxpayers have to pay more, Sharma said.
All these protectionist measures have helped few steel players to make windfall profits, while artificially hiking the cost for downstream industries and consumers, thereby leading to subdued demand and stunted economic growth.
The artificially inflated steel price has also led to higher cost of infrastructure and construction projects both in the private and public sector.
Just as iron ore is a raw material for steel, steel is raw material for downstream engineering and various other products, many of which are exported.
"If the steel industry is protected by the government from international competition, then it must pass on the benefits to downstream sectors, or else the import duty on steel and its various products should be removed to bring parity.
"Hence, there is an urgent need to monitor and regulate the price of steel in India for boosting economic activities throughout the economy, as steel is a major input for all sectors, private and public," Sharma explained.