Steel prices to rise by up to Rs 1,000 on excise duty hike

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The increase in excise duty rate to 12 per cent would again push up the steel prices, rising since January, by up to Rs 1,000 per tonne as costs are likely to increase.

Jindal Steel and Power Ltd's (JSPL) CFO Sushil Maroo said, "The hike in excise duty rates is going to increase cost. Two per cent increase in excise duty means costs will go up by Rs 500 to Rs 1,000 per tonne. It will be passed to consumers."

He, however, declined to put a time frame on increasing the steel prices. Prices for various steel products are currently hovering in the range of Rs 36,000 to Rs 40,000 per tonne.

Rashtriya Ispat Nigam Ltd (RINL) Chairman A.P. Choudhary told: "Certainly, this (increase in excise rate) will have impact on prices, but the extent will depend on the absorbing capacity of the market."

Officials of JSW and Essar Steel also confirmed the hike.

According to a JSW Steel official, price hike could be up to Rs 1,000 per tonne as the increase in excise will be levied ex-factory prices, while an Essar Steel official said the price hike will be to the tune of extent in duty increase.

However, the largest domestic steel producer SAIL said that the move will be revenue neutral for the company.

"For excise duty, generally cenvat is available to us. So, it will be almost revenue neutral," a SAIL spokesperson said.

Leading producers like SAIL, Tata Steel and Essar Steel have increased prices in the last two months, particularly for long products, used largely by the construction industry.

In the Budget for 2012-13, Finance Minister Pranab Mukherjee had announced hike in excise and service tax rates by 2 per cent to 12 per cent each.

The increase in excise rates have become effective from Saturday midnight.