The government is considering reversing its decision to put steel back on the essential commodities list within a year of its removal from the act if steel producers do not hold the price line. Steel minister Ram Vilas Paswan in a letter addressed to Prime Minister Manmohan Singh suggested various measures fiscal and non-fiscal, including putting steel back into Essential Commodities Act.

“In the three-month period since December 2007, steel prices have risen by 20-24 per cent...possibilities of setting up a regulatory mechanism for steel and its inputs and re-classifying steel as an essential commodity may be considered by the government,” Paswan said in his letter.

This is all the more significant in the backdrop of steel prices increasing by about Rs 7,000 during the past three months.Although steel manufacturers have recently reduced prices by about Rs 2,000 a tonne, the producers may again hike prices in tune with international trend. Thus, with inflation rate at 3-year high at 7 per cent, the steel ministry is keeping all options open to ensure steel prices were kept under check.

However, it may be noted that after a meeting with top Ministry officials, the producers had rolled back their prices this week.The government has already withdrawn export incentives being offered to steelmakers in the form of Duty Entitlement Pass Book (DEPB) scheme, which would hit the the bottomlines of major steel producers by about Rs 600 crore. Besides, the minister also recommended setting up a regulator in the sector, which among other things would regularly monitor steel prices and take corrective steps. The Steel Ministry has also suggested that the government could also abolish import duty on the alloy to facilitate imports of steel to bridge the demand-supply mismatch which is hovering around 14 per cent. In order to disincentivise steel exports Paswan also favoured 10 per cent export duty on the alloy which would dissuade the producers from shipping their products abroad.The manufacturers on their part have suggested lowering the excise duty on the alloy to 8 per cent to enable them lower prices and pass it on to the consumer.