The deal itself, as was first reported by this newspaper way back in January, is violative of all principles of justice, and amounts to granting a few big local steel producers a gift cheque worth Rs 5,000 crore. Though it isa different matter that due to very poor demand conditions for steel products for much of the year, these producers were not able to encash the cheque by raising their product prices by a large enough sum to generate this bounty.

The deal was worked out last last year, when global prices of steel products such as hot rolled coils crashed to a low of below $200 a tonne. Though imports form a negligible part of overall steel consumption in the country, global prices do set a standard for local prices as well. The large steel mills petitioned the government and an investigation was done by the Anti-Dumping Directorate to see if steel was being dumped. The investigation showed some dumping, primarily from the CIS countries, and a `fair' price was fixed on the basis of which an anti-dumping duty was to be levied.

Following this and the report on an inter-ministerial committee on steel, the ministry of steel recommended that a floor price be set at $234 for imports of defectives and seconds-grade steel. Theinter-ministerial committee had recommended a floor price only for these grades of steel. This price of $234 was also based on incorrect and totally exaggerated prices of steel, but that's another story. Evidently, this price of $234 wasn't good enough, and with a lot of help from Patnaik, the steel companies managed to get a hugely-higher floor price fixed for imports of prime quality steel (see The Indian Express, March 23). The steel ministry's letter on seconds-grade steel was then followed up, in the third week of November, by another letter from the steel secretary suggesting that a floor price be set for prime quality steel as well, and this price be set at $302 a tonne. A notification was then issued, banning all imports of hot rolled coils if the import price was less than $302 a tonne. Since the actual global price of steel was around $105 lower than this price, based on the existing steel-making capacity of 109 lakh tonnes, theoretically this implied allowing domestic producers topocket an additional Rs 5,000 crore.

Following a furore in Parliament over the various concessions being offered to the steel sector, partly brought into the limelight by statements made by Finance Minister Yashwant Sinha's ex-aide Mohan Guruswamy, the Prime Minister evidently decided that something needed to be done, if only to prevent the issue from snowballing into a major controversy. This was, of course, also prompted by the fact that the users of steel, the Cold Rolled Steel Manufacturers' Association of India (CORSMA) kept the issue alive, by constantly urging the ministries of commerce, steel and even the Prime Minister's Office to do something to correct matters.

What's interesting, or horrifying depending on your point of view, is how the commerce ministry is now trying to prevent any scrapping of the controversial floor price. After several meetings in which CORSMA officials were assured that the floor price would be scrapped, Hegde suddenly decided to do a U-turn. For, last month, the commercesecretary wrote to the PMO saying that Hegde and Patnaik had met and had decided that this was not the appropriate time to scrap the floor price.

At one time, the commerce ministry was even toying with the idea of writing to the Election Commission on the matter. The idea was to ask the EC if taking a decision to scrap the floor price amounted to a policy decision. If it did, it was obviously in contravention of the electoral code, and could not be taken. In other words, the ministry didn't want to scrap the floor price, but wanted to justify this by saying the EC wasn't allowing it to do so!

Now it does appear from the sequence of events that, at least in this particular case, the PMO is keen to resolve matters, but is not getting its way. The PMO, for instance, got the head of the National Institute of Public Finance and Policy, Ashok Lahiri, to study the matter. Lahiri recommended that the floor price for prime quality steel be scrapped immediately. It is equally obvious that one of the reasons for thePMO's lack of success is the fact that the two ministers involved -- Hegde and Patnaik -- are not members of the BJP, and are obviously flexing their muscles with elections round the corner. That, however, is not good enough. When voters cast their lot, and when the government's track record is examined, what is judged is the government in its entirety and not just the BJP ministers. Even a teflon-coated Vajpayee may not be able to keep critics at bay if his government continues to prevaricate on such issues.