In the process, it has become the first steel company to raise prices in the current round, though only for direct company sales, and may set a trend for similar but marginal price hikes by other companies as well.

Jindal Vijaynagar had last month raised prices by Rs 500 a tonne for hot-rolled coils, but dealers say the company was subsequently forced to withdraw it.

Traditionally, in the domestic steel sector, a price increase is not sustainable unless the two largest players, SAIL and Tisco, follow suit. SAIL is yet to announce a price hike, though it has said it "keenly" wants to.

A severe recession in the main user industries is the primary reason for putting the major players in a dilemma. As reported in The Financial Express earlier, all steel companies are unsurewhether the buyers will be able to absorb the price increase and for how long such a move can be sustained given the flat demand.

Meanwhile, the Tata Steel scrip has been heading northwards over the past few weeks in anticipation of the price hike. The stock has risen steadily from June 1, from Rs 107 a share to Rs 143.90 on July 1 on the Bombay Stock Exchange.

The scrip also touched a 52-week high of Rs 160.35 a share on July 5 as expectations of a better performance in the second quarter rose, but dipped marginally to Rs 156.50 a share on Tuesday.

Analysts said if the increase in average realisation is taken as Rs 200, it would prop up the Tata Steel bottomline by Rs 60 crore on an annualised basis given, the company's three million tonne capacity.

If the price hike can be sustained, and a more realistic Rs 300 a tonne increase in realisation is considered, the Tata group flagship would benefit by around Rs 90 crore, an analyst said.

The company took a major hit on the bottomline during the lastfiscal when average realisations were down by around Rs 500 a tonne against that in the previous year. The scrip price, as a result, dipped to unprecedented levels and had even fallen to Rs 68 a share in October last.

Only stringent cost-cutting measures, and sale of investment in group companies enabled the steel major to arrest the slide in profits.

The price hike is less than 2 per cent for long products and slightly more than 3 per cent for flat products. The price hike announced would be only for new contracts to be entered by the company. Company officials say that the annual contracts would continue to be serviced at earlier rates.

The steel industry have also been facing stiff competition from cheaper imports, being brought in at prices lower than their respective floor prices.

However, a significant rise in international prices by around $50 a tonne in the US, have fueled hope that price increases in India can now be sustained.

But this would be primarily because the market in India forsteel is very thin with direct sales forming more than 40 per cent of total steel sales, as compared to its peers in other countries, where indirect sales is close to 90 per cent.

In such a scenario if all the steel companies raise price, the user industry has to accept it whatever be the jump, because the element of competition will be missing.