Punjab chief minister Parkash Singh Badal and state SSIs on Monday demanded withdrawal of import duty on steel. The CM said the customs duty coupled with rising cost of raw material has contributed to hefty increase in steel prices.

The demand comes in the wake of steel manufacturers raising prices by 30% in the last two months apparently on fears of possible increase in coal prices from major producing nation Australia due to floods. This has meant a hefty Rs 9,000 per mt increase in prices in January and February 2011.

The CM mentioned that Punjab had a large number of small-scale units and was one of the largest consumer of steel. He pointed out that the SSI representatives had brought to his notice that main producers of steel like SAIL, Tisco and RINL had raised the prices of steel hampering the growth of SSIs.

Badal added that Punjab being a border state and far away from steel plants, the SSI units have to pay higher freight charges as compared to other states. He emphasised the need to examine afresh the issue of price structure of steel items in proper perspective to check the increase by way of frequent price fluctuations to save the industry in the state which was already facing great hardships.

SSI units at Mandi Gobindgarh specialise in products like engineering equipment, sponge iron-based casting and ingot moulds. The steel hub has about 500 steel re-rolling mills and 90 induction furnaces giving employment to about 90,000 persons directly and another 1,50,000 persons are indirectly earning from this industry. These units produce 29,000 tonne steel every day, or about 70% of the state’s total output. Steel manufacturers say that the demand had grown by 13% last year and is likely to grow by about 14% in 2011. As production was less than half of demand steel imports during the 2010-11 shot up.

Entrepreneurs told FE that during April to December 2010, the national steel consumption up by 8.8%. Similarly steel imports in the same period were 2.3% higher at 5.3 mt as against 5.2 mt in the same period last year.

President, Institute of Indian Foundrymen told FE that “import duty also meant raising the prices of steel scrap by Rs 500 to 600 per tonne thus hitting foundry industry hard”. There are 950 foundry units at Batala and about 90 at Mandi Gobindgarh. The industry was already under cost constraints as the freight charges had doubled.