Assocham seeks regulatory authority to fix road freight for steel sector

New Delhi, Nov 3 (IANS) In a bid to boost the country’s steel sector, industry body Assocham on Thursday urged the government to set up a regulatory authority to fix road freight rates.

The proposal will help break up local monopolies and facilitate movement of iron ore and other raw materials from mines and ports.

“Associated Chambers of Commerce and Industry of India (Assocham) has mooted a proposal to the Union government to constitute an appropriate authority either at the central or state level to fix the ceiling on road freight rates and breaking local monopolies,” the industry body said in a statement here.

Transporters charge exorbitant rates for movement of iron ore and other raw materials from mines and ports to steel plants. Besides, they also prevent free competition through their dominating presence in local areas, Assocham said.

Considering that higher transport costs result in higher costs of production of steel in India, there is an urgent need to bring down freight tariff rates by up to 25 per cent across all raw material and steel products to gain competitive edge, it added.

The industry body also submitted various suggestions to the Steel Ministry to bring back the country’s steel sector on a growth trajectory.

“There is an urgent need to withdraw import duty of five per cent imposed upon metallurgical coke and coking coal to restore competitiveness of the domestic steel industry,” Assocham said in a paper submitted to the Steel Ministry.

It also urged bringing down the rate of royalty on iron ore to reduce the cost of raw materials for steel plants.

“About 15 per cent royalty rate on iron ore together with District Mineral Foundation (DMF) at 30 per cent translates into royalty burden on end user of 19.5 per cent of iron ore cost,” it noted.

Banks should extend working capital loans to steel companies on a priority basis, especially those which have not defaulted on interest payment, while structural problems relating to high debts of various steel companies would take time to resolve, it added.

“There is also a need to create a special funding mechanism for providing capital for brown-field expansion of capacities at the existing steel mills, more so as commercial viability of brown field expansion of steel plants is significantly higher than greenfield plants,” the statement said.

Assocham has also made a budget proposal to accord strategic industry status to steel sector.

“A comprehensive package for steel sector should be unveiled encompassing special financing arm for providing capital for expansion of capacities, easy extension of working capital loans, long-term policy on freight tariffs and augmenting transportation infrastructure capacity to meet needs of steel production,” it said.