In a bid to provide respite to economy from spiralling steel prices, the government on Friday decided on major cuts in excise and custom duties and export incentives even as major producers including SAIL and Essar are understood to have agreed on slashing prices on some steel products by up to Rs 2,000 a tonne.

Aimed at increasing domestic supply at affordable price for high growth areas like automobiles and construction, the package was finalised at a high-level ministerial meeting chaired by Prime Minister Atal Bihari Vajpayee, Commerce Minister Arun Jaitley, Steel Minister B K Tripathi told reporters after an hour-long deliberations.

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While the ministers declined to give details, government sources indicated that the excise duty could be halved to 8 per cent and export incentive like DEPB could be frozen.

Both Jaitley and Tripathi said details of changes in excise and customs duties as also export incentives would be notified soon.

"The decision has been taken with regard to custom, excise and export incentives only relating to steel industry," Jaitley said, adding that Friday's decision would give respite to small-scale industries and secondary steel producers.

According to official sources, the six steel producers including Steel Authority of India Ltd, Tata Steel and Essar, who met Tripathi earlier in the day to communicate their views, were understood to have agreed to cut steel prices by about Rs 2,000 per tonne for SSI and secondary producers.

The government would also subsidise the steel prices for SSIs and secondary producers to the tune of Rs 500 a tonne through Joint Plant Committee.

The government is believed to have brought down the customs duty on coking coal to nil from existing 5 per cent apart from slashing the rate on pig iron from 10 to 5 per cent and on non-coking coal from 15 to 5 per cent.

To de-incentivise exports and ensure supply of steel in the domestic market, the government is also understood to have brought down draw back rates.

Later an official statement after the meeting said this was an extraordinary situation which required immediate attention as the existence of small scale sector was under threat due to rising steel prices.