The three-month moratorium period on steel prices comes to an end on August 7.
The UPA government's focus is clearly to control inflation. The steel producers have been informally told to hold on to the current price line for a few more months. However, if they still choose to increase prices, the government will be forced to intervene, the official said.
While the official agreed that a price rise is due following a steep increase in the cost of raw materials and freight charges, he said,
SAIL has already been told to hold on to its price line even if the private producers decide to raise prices.
It's more of a wait and watch scenario. If private producers do not help the government in its efforts to contain inflation, the government will be left with no choice but to take steps that may not be to the liking of the industry, he said.
Concerned over the price rise, government in May imposed up to 15% duty on export of the steel, but later withdrew it on flat products conceding to the demands from industry, which had voluntarily reduced the rates by Rs 4,000 per tonne.
However, as the three month period expires next month, the steel industry has been hinting price revision from second week of August, saying its input cost has risen substantially on account of the increase in rates of coking coal and iron ore, the two simportant raw materials for steel making.
Many steel producers including Tata Steel have already been voicing their concerns in this regard and have conveyed to the government that controlling prices artificially will hurt their expansion plans.
However, the victory in the confidence motoion in Parliament has made the government's attitude tough. It is in no mood to give in to the industry's demand now as the alternative is to let inflation spiral.
Inflation, as measured by WPI, is currently at a 13-year high of 11.89%.