The market sentiment is reflected in the corporate offices of the key steel producers, where much of post-Budget optimism is fast fading. "I don't know how many people understand this," says an exasperated Ratan Jindal, managing director of Jindal Strips, "but the four per cent countervailing duty is not a `swadeshi' duty at all. It does not create a level playing field for the domestic industry, it gives an added advantage to overseas companies exporting to India."

Jindal Strips is the largest producer of stainless steel in the country, with a grip over 40 per cent of the home market. Imported raw materials like nickel, scrap, ferro alloys and refractories constitute 55 per cent of the cost of producing the pricey alloy.

Ratan Jindal argues that thecountervailing duty effectively works out to six per cent, since it is computed over and above other prevailing levies. The additional customs duty makes imported raw materials that much expensive, jacking up the ultimate cost of steel produced at home.

The inflated input costs of home-made steel give a headstart to imported varieties. The starting advantage does not quite get crossed out by the "swadeshi" duty, since it does not measure up to domestic levies like excise and sales tax.

"It is true that the countervailing duty has increased the cost of steel making inputs," say sources in the Steel Authority of India Limited (SAIL), which controls 46 per cent of the total steel market. The conglomerate of public sector steel mills depends heavily on imported coking coal as the "required" low-ash content grade is not "indigenously available." Company brass feel that the "additional pressure on the cost of production" would have to be absorbed by the producer, implying that they had not bargained for amiraculous recovery in market sentiments.

The three-million-tonne-capacity long products plant, the Rashtriya Ispat Nigam Limited (RINL) also relies considerably on imported raw materials and will be severely hit by the special import duty. In addition, reduction in modwat benefits will cost Rashtriya Ispat Nigam Limited Rs 1 crore and the re-classification of Railway freight will make transporting inputs to the plant dearer by Rs 6.68 crore.

The total post-Budget drain on Rashtriya Ispat Nigam Limited's resources will be roughly Rs 32 crore and the post-Budget gains are not yet apparent.

"Our survival" say the company insiders, "will depend on the extent of government expenditure and on whether or not, infrastructure projects take off." Long products, which constitute most of the firm's output, (not counting pig iron) cater essentially for construction work and the building industry. Marketing men in SAIL have also pinned their hopes on a massive upsurge in infrastructure-building.

"The medium-termprospects are encouraging," say some, pointing out that the announcement of counter-guarantees for fast-track power projects should boost the demand for steel. Riding on the optimism, companies like SAIL, the RINL and Ispat Industries hiked the list prices of their products soon after the Budget announcements. Market watchers say much of resulting premiums have now been rolled back with discounts. "We raised our prices too," say sources in a major long products producer, "but the discounts are now back, because the market cannot absorb a higher price."

Ispat Industries vice-president (marketing) Barin Das corroborates that statement. "We do not foresee a significant increase in steel prices in the forthcoming months in long products," he says, "however, in flat products, hot rolled (HR) coils, sheets and plates, prices would increase by Rs 400 to Rs 500 a tonne." The market prices of some grades of long products, like mild steel angles, girders, joists and channels were actually trading at prices that weremore than five per cent higher in mid June, than in May.

The trend reversed last week, though, and the prevailing premiums on steel are now barely three per cent more than before finance minister Yashwant Sinha presented his Union Budget.

The market for long products traditionally dips a little during the rains, when construction work come to a standstill. The trend, though, is apparent in the flat steel market as well. Flats are trading at prices that were six per cent higher till June 18, but are now merely three per cent more than a month ago. Prices of plates held steady throughout June, with the exception of Tata Steel plates, the market prices of which suddenly fell by two per cent a fortnight ago.

The only post-Budget gainer seems to be the Jindal brand of flats. Prices of Jindal plates went up by five per cent two weeks ago, after holding steady throughout the last two months. The stiff competition from imports has compelled flat steel producers to peg their prices to the landed cost of rivalgrades. Import prices consequently, dictate the domestic prices of flats, for which the four per cent additional customs duty automatically becomes a boon.