Cement, steel firms acting like cartels: FM

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Finance Minister P Chidambaram warned he would take “tough measures” against cement and steel companies for “behaving like cartels” to raise prices. The minister also said the government was planning another round of duty cuts and a possible interest rate hike to get prices down in the economy.

Intervening in the debate on price rise in Parliament on Wednesday, the minister said, “If their behaviour does not change, government will not hesitate to take tough measures.”

Inflation jumped to a 40-month high of 7.41% in the last week of fiscal 2007-08, beating expectations. That was a neat 241 basis points above the 5% ‘tolerance level’ of the central bank. The current level is “unacceptable”, RBI governor told a news channel in New York. A few hours later, agriculture minister Sharad Pawar announced plans to import one million tonne edible oil and 15 lakh tonne pulses to keep their prices down. Last week, the government banned cement exports and withdrew all tax incentives on the export of steel to augment supplies.

Chidambaram said the government would not hesitate to “sacrifice revenue to control prices.” He asked states to take “stringent measures against hoarders”. Hoarding, he claimed, was partly responsible for the price rise. He told the agitated legislators that only states can use the Essential Services and Maintenance Act (ESMA) to deal with hoarders, as the Centre did not have that power.

“By taking appropriate fiscal, monetary and supply-side measures, we can beat back inflationary expectations,” he said. Pointing out that the Reserve Bank has raised mandatory deposits by banks with the central bank eight times in recent past, he said governor YV Reddy will assess the situation and take appropriate monetary steps.