This, however, raises some questions: Is there any need to maintain such cooperation when steel markets the world over are once again buoyant? Does the market economy, which presupposes competition, permit such planned cooperation for long? Or, should the industry concentrate on producing cheaper steel to remain competitive, both in the domestic and international markets?

Experience the world over shows that economic liberalisation brings with it genuine competition, which, among others things, manifests itself in a fall in prices of goods and services. To stay in the market, therefore, companies have to produce at lower costs and achieve higher margins. They have to pass on a part of the margins to the customers by way of lower prices to get a bigger slice of the market pie.

Moreover, in a free market economy, there could be more supply than the market can absorb. In such a case, prices normally go down due to over- accumulation of capacities. A closer scrutiny of the Indian steel industry clearly shows that apart from dumping from abroad, prices of steel have fallen more due to an increase in assets than due to their success in making cheaper products.

Old Indian steel companies have survived and thrived during the controlled regime depending mainly on government consumption and its expenditure on fixed capital. This holds true for many other industries too. In other words, Indian industry has always been patron-based, instead of being market-driven. Therefore, when some industry observers express the fear that the gradual withdrawal of the state is drying up industrial initiative, they cannot be blamed.

However, during a recent seminar in Kolkata, two veterans of Indian steel industry, Tata Steel's managing director JJ Irani and Bhilai Steel Plant's managing director V Gujral have advised the industry not to get carried away by the recent increases in steel prices. They suggested that both private and public sector companies should minimise competition for better price realisation.

Pointing to the uncertainty and volatility of the flat steel product market in the world, Mr Gujral said it was important that the market was observed carefully. "

It will not be proper to get carried away by the recent increases in the steel prices around the world. This buoyancy may be short lived and not as substantial as it appears," he added.

Indian steel companies need to make the most of this opportunity, however limited it might be. The consumption of steel, particularly, of flat products has not increased to the desired level in the domestic market. At the same time, steel companies know very well that the international market has become extremely competitive, and this has reduced their earning potential from exports. Moreover, anti-dumping and countervelling duties imposed on Indian steel by the US, European Union and Canada have reduced the scope for exports to the developed countries. Therefore, Indian companies are also trying to explore new markets in order to relieve pressure from the domestic market, though with limited success.

Steel company officials would love to point out the successful experience of Japan in containing oversupply through production cuts. But this cannot be a long-term solution, feel industry observers here.

In recent periods, old integrated steel companies have succeeded in reducing the cost of production by improving techno-economic parameters and reducing manpower. But such cuts were not enough to maintain their profitability after passing on the benefits of increased production and productivity to consumers. Except for Tata Steel, other companies are still making losses. This has made it difficult for these companies, particularly for government-owned Steel Authority of India Ltd, to generate resources for modernisation and upgradation of existing facilities. Even then, it has to be admitted that these companies have to increase their productivity-both of men and machine, and manage their funds in a more efficient way.

Although new Indian steel companies have modern facilities, sophisticated product-mix and high quality products, as well as lower manpower, they, too, are in deep crisis, saddled with a huge debt burden. No doubt, high project costs mainly due to delays in project implementation and inefficient fund management, have led to such a situation. But global and domestic over- production and lower growth in domestic power and other infrastructure sectors, as well as stagnating demands in the white goods sector have also contributed to their problems.

Hence, steelmakers have sought the government's support to help remove US anti-dumping and countervelling duties. They have also demanded that import duties on coking and non-coking coal should be reduced. But this may affect the government-owned Coal India. Similarly, if freight cost is lowered, the railways will lose revenue. However, their demand for improved port facilities can be considered.

Will the Indian steel industry be able to compete globally if the government agrees to all its demands in the forthcoming Budget? The answer ultimately lies in the ability of the companies' managements to produce cheap steel and a high level of efficiency.