Development Commissioner for iron and steel, PK Prasanna, who chairs the forum, spoke at length to The Financial Express. He said the forum would function like any other export promotion council. The club has not yet found the time to discuss its business agenda. ``But at least we have a concept now,'' enthused Prasanna, who was confident that the Indian exporter would be able to find his own niche in the global metals market.

Excerpts:

The Union steel ministry has set up a Steel Exporters' Forum for the first time. Considering the fact that thecountry exported very little steel only half a decade ago, can we assume that you see new and better prospects for Indian steel abroad ?

The domestic steel production can no longer be determined by domestic demand. Being global players means that steel producers here have to be responsive to the international market. The steel ministry has been recommending exports to steel producers ever since the demand for steel at home dropped and steel companies had to struggle to sell in a bad market. The alternative of course, would be to cut back production till the domestic demand picks up.

It would be suicidal for steel producers to cut back production in a liberalised market. Reducing supplies would not increase demand at all, when people could still buy steel from the international market.

You mean that the comparatively lower import duties (now at roughly 32 per cent) would enable cheap imports to depress domestic prices in any case ? Steel producers also cannot reduce production beyond a pointbecause their fixed costs, like wages, remain the same...

Yes, and moreover, higher production gives them the advantage of economies of scale. The principle of marginal costing comes into effect at higher levels of production.

Even so, do you think the Indian steel producer, who has not been able to stand up to inexpensive imports from abroad, will be able to sell steel at competitive prices abroad ?

We will have to be competitive if we are going to be players in a global market. We will have to find ways and means of competing with imports.

Does not the fact that steel producers here find competing with imports tough, suggest that the costs of producing steel at home are higher? In that case, how will Indian steel-makers protect their margins in the international market ?pNobody will export for a loss. It is upto the steel producer to ensure that his costs are competitive. If the operational costs of steel exporters are competitive, there would always be a spread available forthem.

The competitiveness of the exporters also vary from product to product.

In a few items, we might have a competitive edge, in others overseas steel producers will have an advantage. If we move up the value chain, we may not be able to find a market, but in the middle and lower end of that chain, may be we can compete.

Last year we exported close to two million tonne of steel and imported roughly that much, but not the same products. That is how a free market regime works. Where we have a competitive edge we will export, where they (overseas steel producers) have an edge, they will export.