The Hindu Business Line : Steel Ministry says no sign of cartelisation

Did the Government go overboard in accusing the steel industry of functioning like a cartel? A day after the Finance Minister, Mr P. Chidambaram, told the Lok Sabha that there were signs that steel manufacturers were behaving like a cartel, another Minister informed the same House on Thursday that the Steel Ministry was not aware of any cartelisation in this industry.

Contradicting the Finance Minister, the newly-appointed Minister of State for Steel, Mr Jitin Prasada, placed a written reply to a question “whether the Government was aware of any cartel formed by steel producing companies to keep the prices high.”

The reply said the Ministry of Steel monitors the retail market price of representative steel products in various markets. It also explained that steel prices were determined by market factors such as demand and supply situation, international price as per landed cost of imports and the cost of input materials.

Statement

Then comes the categorical statement: However, no evidence on cartelisation by steel companies in determining steel prices has been brought to the notice of the Ministry of Steel.

The steel industry also maintains that cartelisation is neither possible nor a reality in India.

According to the Indian Steel Alliance (ISA), a representative body of primary steel producers, out of the 60 million tonnes of steel production in the country this year, 30 mt, that is 50 per cent production, came from the large number of secondary steel producers in the unorganised sector where the material is sold mostly through middlemen and agents to customers.

Fractured structure

Of the remaining 30 mt produced by the large integrated steel plants, about 50 per cent comes from the Government-owned steel companies and only 15 mt is produced by the private steel companies.

“Therefore, with this fractured structure of the steel industry, cartelisation is neither possible nor a reality,” says ISA.

The plausible reason for the Government’s differing stance could be that written replies to Parliament are processed days before presentation.

But the question remains—what exactly is the Government’s perception about cartelisation in the steel industry?