The writing on the wall suggests a drastic cutback in steel production at home, a blip on which was heard on the official statistics on infrastructure industries. Steel production has actually come down by 1.3 per cent since February 1997, after going up by 6.2 per cent in the last lap of the 1996-97 fiscal. The trend was inevitable, since much of the price-cutting among steel producers at home has stemmed from a pressure to clear stocks, rather than incur a cost on inventory.

The first indication of a change of tack came from market leader SAIL, which increased the list prices of five of its products on April 1. What was really significant in that move was not the less than five per cent mark-up on SAIL's stockyard price, butthe fact that the hike came in grades of steel in which SAIL did not have to offer the customary year-end discounts, that help push sales.

Incidentally, SAIL also hinted that it would go slow with its production plans in the first quarter, in a bid to gauge the market. Two SAIL blast furnaces, ostensibly pulled down for repairs in 1996, have still not gone back on stream. Tata Steel showed no signs of cutting back production, except in bearings, for which there has been a dip in demand.

Tata Steel also did not raise its listed prices on April 1, but did pull back discounts and reduce the number of days of credit it was willing to offer customers. Over the last two years, the discounts and credits have been the only indications of steel price movements, since stockyard "list" prices have more or less remained constant.

Discounts and credits have appeared and disappeared every quarter since steel pricing and distribution was decontrolled in 1992. The discounts (over the listed price) and suppliers'credits, have also been the market instruments of cut-throat competition.

Every company in the business of selling steel has under-cut prices in the garb of a discount or a credit on sales -- credit that has sometimes been for as long as 180 days. Every company in the business has also burnt its fingers in the game, resulting in an almost cross-industry slide in net profits by the middle of last year.

The SAIL balance-sheet showed the most drastic impact of discounted sales, when its profit after tax (PAT) first dropped by more than 50 per cent to Rs 515 crore in 1996-97 from Rs 1,318.61 crore the year before. The slide continued unarrested last year. The roughly Rs 14,000-crore-turnover giant's net profit for the first half dipped by a whopping 86 per cent to Rs 48.53 crore, from Rs 361.45 crore in the first six months of 1996-97.

SAIL was not alone in its moment of sorrow. Tata Steel's net profit for the period slid from Rs 252.22 crore to Rs 176.48 crore. Jindal Strips' net profit fell more gently,from Rs 38.51 crore in the first half of 1996-97 to Rs 37.75 crore between April and September last year. The list could go on.Steel companies blamed the drop in profitability on the increasing costs of inputs like raw materials and energy. Some even admitted that the real problem was that the input cost hikes could not be passed on to consumers.

"Everybody is cutting prices to stay alive," said a senior executive in a private sector steel company. The truth was that everybody was under-cutting prices to be able to reduce inventory.

A dichotomy that has stuck with the industry all through its teething troubles with liberalisation was a tendency to push production irrespective of the level of demand for steel. Steel production has on an average increased by five per cent every year, peaking at 23.9 million tonnes last year, when apparent consumption (read demand) grew by barely one per cent.

During the year gone by, when steel producers took another beating at the market (expected to show in their annualresults soon) they actually managed to whittle down their cumulative inventory by 40 per cent. Except for Tata Steel, which admits to a 10 per cent growth in its stockpile of unsold steel, all other private sector companies seem to have managed to clean up their stockyards. The SAIL stockyards showed exactly as much steel on April 1 as it had begun with a year ago. A desperate round of discounts in the last month of the fiscal helped SAIL sell 1.2 million tonnes of steel in March alone, which was as much as it had managed to sell in the preceding two months put together. Tata Steel resorted to discounts and credits too and like SAIL promptly rolled them back on the first day of the new fiscal.

``Don't look at the production statistics of the companies,'' said a Cold Rolled Steel Manufacturers' Association (CORSMA) spokesman hotly, ``look at their profit figures, look at their share prices...'' The profitability and shares prices of steel companies have not moved in tandem. The gains have been marginal andlosses have been phenomenal.

On Dalal Street, the Tisco scrip has gained by 2.16 per cent during 1997-98, Jindal Strips has gained 4.8 per cent and Essar Steel's stock has gone up by 16 per cent since the previous fiscal. But the SAIL scrip is selling at a price that is 23 per cent lower, Ispat Industries' stocks have depreciated 30 per cent in value and the Lloyd Steel scrip, which was already trading below par in April 1997, dipped further to Rs 6.50 a share, showing a drop of 29 per cent.

Since share prices take a cue from profit figures, the stock movements amply demonstrate that all steel companies were not in the same boat. "Some of them barely have their head above water," quipped a private sector steel producer, "some are neck deep and some are holding their breath under water."