Steelmin divided over cartelisation

The Union steel ministry is split wide open. Less than two weeks in his job as minister of state for steel, Jitin Prasada, by ruling out cartelisation by steel producers, has undermined the ministry's proposals to cool steel prices, the case for which was carefully built up over the last six months by his boss Ram Vilas Paswan.

The steel ministry has been gunning for measures like export tax on steel, ad valorem rates of tax on iron ore exports and cuts in excise duty on finished steel. These were also vetted by an inter-ministerial group that included Union finance minister P. Chidambaram.

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However, the Cabinet Committee on Prices (CCP), which was scheduled to put into play fiscal measures to rein in prices failed to meet this week. Ministry officials said this was due to sharp differences between ministers and bureaucrats and was further accentuated by junior minister Prasada.

In a written reply to Parliament on Thursday, Prasada said no evidence of cartelisation by steel producers in determining prices had been brought to the notice of the steel ministry. "The steel prices are determined by market forces, such as demand and supply and international prices...However, no evidence on cartelisation by steel companies in determining steel prices has been brought to the notice of the ministry," he said.

This was at a time when the Monopolies and Restrictive Trade Practices Commission (MRTPC) has taken cognizance of complaints relating to cartelisation and is about to issue notices to all steel companies barring state controlled-Steel Authority of India Ltd (SAIL).

Senior officials in the steel ministry said the minister of state, by ruling out the possibility of cartelisation as the cause of steel price rise, and that too in Parliament, had jeopardised proposals to cool prices, opening up the possibility of legal challenge by steel companies.

Chidambaram, in Parliament too blamed cartelisation of cement and steel producers for the price rise, but with the steel ministry itself divided on the issue, a CCP meet at this juncture would be infructuous, officials said. They also raise questions about Prasada's ability to secure and analyse all input and production cost data of steel producers within less than a fortnight into his job.

His statement in Parliament also knocks down a study initiated by the ministry into the rise in raw material costs and its correlation with the price hikes effected by steel companies over the past four months, officials said. The statement by the junior minister may have also pre-empted the ministry's last ditch measure of appointing a regulator for the steel sector, making steel an essential commodity and arming the government with powers of price determination.

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"At present the government has no formal proposal for setting up of a regulatory authority to contain the steel prices in the country," Prasada had said. Senior ministry officials said that MRTPC investigations into alleged cartels usually take three to four months since they involve collection of evidence, vast data on costs at various stages of production and statements from producers. Giving a clean chit to producers at this stage may have been too hasty and has tied hands of the government in fighting inflationary pressures.

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