Leading steel producers Tata Steel and state-owned Steel Authority of India Ltd on Tuesday agreed to hold their prices for 2-3 months after the government's top economic managers spoke out against the rising cost of steel and cement. Essar Steel said it too could look at a similar assurance.
Prime Minister Manmohan Singh publicly advised steel companies not to fall prey to the temptation of seeking windfall gains from market manipulation in a period of excess demand.
Addressing a gathering at Tata Steel's centenary celebrations, Singh said, "Industry and trade must eschew short-term gains that hurt consumers and disrupt the stability of the process of economic growth."
Finance Minister P Chidambaram told Parliament that cement and steel producers were acting like a cartel and the government was looking at legal and administrative measures to deal with them.
Planning Commission Deputy Chairman Montek Singh Ahluwalia warned that the Competition Commission could take action against steel producers in case they do not lower prices.
Led by a sharp rise in steel and cement prices, the inflation rate has crossed the 7 per cent mark, way beyond the Reserve Bank of India's 'comfort zone' of within 5 per cent.
With elections due in four states in the next few months, the Congress-led United Progressive Alliance has gone on an overdrive to cool spiralling prices, which includes removal of export incentives for steel, ban on cement exports and duty-free import of cement.
During the day, there were also indications that a decision on futures trading would be taken soon. The Left parties have increased pressure on the government to ban futures trading on more commodities after tur, urad wheat and rice to rein in prices.
The Abhijit Sen Committee on futures trading will meet tomorrow to iron out the differences that have emerged on its draft recommendations, Sharad Joshi, a committee member, said.
Amid rising criticism that futures trading has led to the rise in commodity prices, the Centre is awaiting the report of the committee, and if it does not receive it within stipulated time, it would take a call independently on whether to impose a ban on futures market or not.
"The draft claims that the Union Government manages to insulate domestic prices in wheat from high global prices because of ban on futures trading of that foodgrain. That was the conclusion drawn in the draft, I don't think it was logical," Joshi said, adding: "To say that the ban on the futures alone has resulted in this is not very logical."
Ahluwalia too said rising prices were not connected with such trading and any restriction will be contrary to normal economic rationale. "The rise and fall in prices is not at all connected with whether there is a futures market or not," he said.
Responding to a query on extending the ban to other commodities in futures trading, he said: "We should not ban it. It will be a serious mistake."
Supporting industry demand for removal of transaction taxes on securities and commodity futures, Ahluwalia suggested a modest increase in surcharge on income tax as a revenue-neutral alternative.
"The imposition of a transaction tax is a bad idea. The revenue consideration in these taxes is quite small," he said.