For the first time, the government is toying with a proposal to impose export duties on steel in a bid to discourage exports and manage supply-side constraints. Steel - a major input for most industries from auto to construction and equipment - has seen a huge escalation in prices over the last few months, triggering inflationary pressures. The government’s attempts to reign in domestic prices by coercing steel makers to reduce prices have failed to yield results.
In a knee-jerk reaction to continuous increase in domestic steel prices, the government is considering a proposal to levy 10% export duty on all grades of finished steel. The move is aimed at improving the supply situation of steel in the market, which has also resulted in price rise alongwith a globally firm steel market.
Steel prices have moved up over 30% in the first three months of 2008, with price of benchmark hot-rolled coil hovering over Rs 33,000 per tonne against Rs 24,000 a tonne in December 2007. While the steel ministry was successful in getting an agreement from steel makers to cut steel prices by Rs 500-1,000 per tonne last month, prices bounced back in March with a sharp 10% increase.
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