FM warns steel, cement cos of more govt steps

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With inflation rising to 44-month high, the finance minister P Chidambaram on Friday warned steel and cement manufacturers of more administrative steps, if rate cuts announced by them were not enough to check price rise.

“As I said we are waiting for steel and cement (prices) reductions to come into force but we always reserve the right to take administrative measures if they are not enough. But for the time being we simply have to remain a little patient,” Chidambaram said on the sidelines of a Ficci function here.

Major steel producers decided to reduce prices by Rs 4,000 a tonne after meeting the Prime Minister Manmohan Singh on May 7. Some cement companies have also announced Rs 3 to Rs 7.5 reduction on a bag of 50 kg.

He said, if steel and cement kick in, there is still expectation that inflation will moderate. Steel and cement sectors together contribute 12% to overall inflation. For the week ended May 3, inflation rose to nearly four- year-high of 7.83% against 7.61% in the previous week. But iron and steel prices declined by 1.7% while that of cement fell 0.4%.

Chidambaram said the rise in inflation during the week ended May 3 is “indeed worrying”, but the decline in inflation rate in primary articles group is a silver-lining amidst dark clouds.

So far as the rise in inflation in fuel, power, light and lubricant category is concerned, the finance minister said “unless crude prices decline I am afraid we are stuck with high inflation in that group.”

Some industrial fuels like naphtha prices increased by 7%, furnace oil by 4% , light diesel oil and bitumen by 2% during the week on account of flaring global crude oil prices. Chidambaram said in fuel, power and light group category, every item is linked to crude oil. In this category, lignite has shown a very sharp rise of 16.3% because of overall fuel prices.

“I have asked people to look into why lignite prices have risen very sharply in the week,” Chidambaram said. In the manufactured category, he said, roll back of steel prices has not yet reflected in inflation during the week.

Aluminium, sulphate, synthetic yarn, agricultural implement have shown a sharp price rise, pushing up inflation in manufactured items category.