The Hindu Business Line : Secondary steel makers allege arbitrary pricing by big units

New Delhi, May 10 Secondary steel producers have complained to the Finance Minister that after announcing conditional price reduction of up to Rs 4,000 a tonne, the major steel producers, both in private and public sectors, have started to arbitrarily fix the ratio between the export and domestic sales of their customers in order to extract higher prices.

The Cold Rolled Steel Manufacturers Association of India (Corsma), in a letter to the Finance Minister, Mr P. Chidambaram, has complained that “the ratio between domestic and export sales are being arbitrarily fixed.”

The Executive Director of Corsma, Mr S.C. Mathur, said that the major producers are offering a portion of the total quantity at reduced prices and charging the pre-reduction prices for the remaining quantity assuming that it would be used for export production, he said.

Major steel producers, while announcing the price reduction earlier this week after a meeting with the Prime Minister, had made it clear that the reductions would be applicable only for steel that gets consumed in India either directly or after processing.

Though the major producers are in no way equipped to monitor how much quantity is being exported by a secondary producer, they are charging higher prices by fixing arbitrary ratios which should immediately be stopped, Mr Mathur said.

Self-declaration

When contacted, a senior official in SAIL, while admitting that there was no way to monitor the exports of their customers, said that “earlier there had been a practice of taking a self declaration from the customers. But, as of today, such practice has not started yet.”

Interestingly, in the existing steel shortage situation, the secondary producers are not supposed to use domestic steel for export-oriented production.

Import factor

In a meeting with the Steel Minister on April 3, the secondary producers had assured the Government that they would import an equivalent amount of steel as they export.

The Steel Secretary, Mr R.S. Pande, had told newspersons after the meeting that “the secondary producers today said that they would be importing HR steel to the extent they export cold rolled (CR) and galvanised steel.”

The SAIL official pointed out that “though the primary producers cannot monitor their customers’ export sales, the customs department has the necessary data to determine whether they are actually importing to the extent of their exports through the advance license scheme or not.”

“The secondary producers are trying to benefit from lower domestic prices and using Indian steel for making export products despite their commitment to the contrary to the Government.

“If the Government wants it can check out the customs data and take penal measures,” the official pointed out.