The Hindu Business Line : Forging industry faults domestic steel companies for pushing up prices

Forging ahead: (From left) Mr V. Mahadevan, President - Indian Institute of Foundrymen and Managing Director, Hinduja Foundries; Mr Vidyashankar Krishnan, President - The Association of Indian Forging Industry (AIFI) and Managing Director, MM Forgings; and Mr S. Seetharaman, Chairman, Southern Region of AIFI and Managing Director, Super Auto Forge Ltd, at a press conference in Chennai on Wednesday.

Our Bureau

Chennai, April 2 In his recent Budget speech, the Finance Minister, Mr P. Chidambaram, observed that steel producers showed a tendency of being “oligopolistic”. Industries that use steel as raw material, such as forgings, castings and construction, agree.

Mr S. Seetharaman, Chairman – Southern Region, Association of Indian Forging Industry (AIFI), notes that his company, Super Auto Forge Ltd, would get identically worded letters from various steel producers, all mentioning price hike by the same amount.

Mr Vidyashankar Krishnan, President, AIFI, says he is collecting such letters — evidence to place before the MRTP Commission. He says the AIFI would go to the anti-Trust body for redress, if other efforts of the Association to bring down the prices of steel failed.

Steel prices have risen by 40 per cent over the last two months to around Rs 55,000 a tonne, a price that is twice as much as it was a year ago. Steel users allege that domestic steel producers have been raising prices on par with international prices, with no relevance to cost of production.

The user industries want a regulatory body for the steel industry. They agree that such as suggestion is out of sync with the current times, when the favoured model is market economy. But they also point out that steel producers and the companies that mine iron ore, are profiteering at the cost of the user industries.

At a press conference here on Wednesday, steel users said that they have demanded of the Government to either to ban steel and iron ore exports or levy export duty, remove restriction in import of all scrap including rails, and to bring down import duty on pig iron and coke to zero.

imported steel

Mr Krishnan said the ex-factory prices of steel in the international markets were 20-30 per cent cheaper for local delivery than Indian local prices, as Indian steel producers sell steel at approximately the same price as the landed cost of imported steel.

AIFI sees no reason why this should be so. The landed cost of imported steel includes levies such as export duty and cost of transportation and handling, while the steel supplied by Indian producers incur none of these costs.

He said that China discourages exports of steel by putting an export tax and encourages exports of value-added products such as auto components. In contrast, India allows exports of iron ore at a nominal duty of Rs 300 a tonne, helping China produce steel cheaper.

All this makes it worthwhile for Indian buyers of steel products, such as automotive companies, to import components from China. Mr Krishnan said that a few customers of his company had started to buy from China.

Both Mr Krishnan and Mr V. Mahadevan, President, Indian Institute of Foundrymen, noted that steel companies such as Tata Steel and SAIL were making huge operating profits of about 45 per cent of sales. They stressed that the rise in steel prices were disproportionately higher than the increase in input costs of steel producers.

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