Steel subsidies make a covert comeback

KOLKATA: In unalloyed politicisation of steel pricing, the government has nudged Indian steel producers to offer disguised subsidies for steel sold in the rural markets. And this in the name of the UPA government’s common minimum programme (CMP).

In a decision taken after a meeting between the government and major steel producers, the latter will make available steel products in rural districts and blocks through their dealer network where the cost of transportation as well as distributors’ margins will have to be borne by the steel companies. It is reckoned that this would work out to around Rs 600-1,000 per tonne of steel sold in rural India.

The meeting, attended by representatives of the Steel Authority of India Ltd, Tata Steel, Essar Steel, Jindal Steel and Ispat Industries, was called by Union steel secretary RS Pandey and it was also decided that when working out their pricing strategy, the steel companies “will keep the concerns of the common man in mind.”

This comes in the wake of persistent appeals to steel companies by Union steel minister Ram Vilas Paswan that “prices of steel should be kept at reasonable levels to safeguard the interests of the common man in accordance with the UPA’s common minimum programme.”

In keeping with such subtle pressures from the government, integrated steel companies pruned prices of benchmark hot rolled (HR) coils by Rs 750-1000, earlies this month.
The steel companies, of course, refused to officially comment on the new rural pricing strategy and the idea of bearing transportation costs and distribution margins, but senior officials in Tata Steel and SAIL privately admitted that steel producers would end up subsidising the government because the bulk of long products consumed in rural markets went into government-funded projects such as building of healthcare centres, panchayat halls, water tanks, school buildings, etc.

Though disaggregated figures of various steel products sold in rural and urban markets are not readily available, it is common knowledge that most of the steel bought by individual rural customers was in one product segment — galvanised plant (GP) sheets for packaging and tools and galvanised corrugated (GC) sheets for roofings of rural houses.

Also, to refocus steel companies’ attention on the `aam aadmi’, the meeting between steel company representatives and the government has decided that all main producers will adopt villages around their plants as part of their corporate social responsibility and help develop these villages as ‘model steel villages’.

According to the Union steel ministry, “ appropriate schemes in areas of health, education and livelihood promotion will be drawn up in conjunction with government-sponsored programmes. And in these programmes, endeavours would be made in the use of steel.”