With inflation at 7.41 percent, the UPA government plans to provide concessions to steel producers in the form of lower input costs so that they can pass on the relief to consumers through cut in retail prices.

The assistance will be through reversal of the recent rail freight increase, abolishing import duty on various inputs, cutting excise duty on different forms of iron and raw steel, and introducing a duty on them to discourage exports.

These measures form part of the proposal sent by the Steel Ministry to the Finance Ministry which is preparing a note ahead of the meeting of the Cabinet Committee on Prices tomorrow. Sources said the Finance Ministry has agreed “in-principle” to these steps.

The Steel Ministry has also called for a ban on futures trading in iron and steel, as desired by secondary steel producers. “With a view to bring stability in steel prices, it is proposed that futures trading in iron and steel be suspended for a period of six months, as the same is fueling speculation in steel prices,” it says.

Although steel’s contribution in the wholesale price index — the measure of inflation — is only marginal at around 3.5 percent, price speculation has led to secondary producers paying a higher price and, thereby, charging more from consumers. The sector provides for 85 percent of the common man’s demand.

The proposal says the measures would take care of the producers’ supply concerns without which they would be forced to raise retail prices. The rising raw material costs and other available inputs and high excise duties have been the industry’s major constraints. Prices have shot up by 60 to 80 percent in the last one year on the back of rising input costs.

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