Steel show: Prices on the roll

After successfully reigning in cement manufacturers, the government is now desperate to get steel makers to put a brake on prices. But its efforts seem to have come to a naught, with steel manufacturers set to raise prices by Rs 500-1,000 per tonne in April. While on record, R.S. Pandey, Steel Secretary, stoically maintains that "the industry is free to decide upon the issue of prices." Sources within the ministry admit that private steel manufacturers' decision to reverse the partial rollback, announced earlier in March, has put them on a collision course with the government. The revision of prices comes in the wake of an impending global hike to the tune of $30-50 (Rs 1,320-2,200) per tonne, following China's decision to lower steel capacity by 35 million tonnes. This rise has also irked the mining community, already at loggerheads with the steel manufacturers and the government on the issue of iron ore exports. "The steel lobby wants to have its cake and eat it too," alleges an official of the Federation of Indian Minerals Industry (FIMI), "first they want us to keep supplying them cheap ore and then they export steel at global prices." With global demand of steel expected to rise by 13 per cent during 2007-08, China and India will become net importers of the commodity, with the latter expected to import 5 mt of finished steel. Steel makers, however, are unfazed. "To control inflation, you need sound fiscal measures and price control is not one of them," says a steel industry veteran. "Indian steel prices cannot be divorced from global levels."

-Aman Malik

Ticket, But No Ride
Is Air Deccan profiting by overbooking flights?

Selling tickets for seats that don't exist may appear fraudulent, but it's an accepted practice in the airline industry. Overbooking is justified on the premise that a few passengers may not show up, but when an airline is accused of deliberately overbooking flights, then slowing the lines at check-in counters and, subsequently, offloading passengers-who don't get refunded-on the pretext of checking in late, it is tantamount to cheating. News channel CNN IBN has run stories that suggest India's first budget carrier, Air Deccan, has used such tactics. The airline denies the charges and says that it will claim damages of Rs 50 crore by slapping a defamation suit on the channel. "It's rogue journalism," says Capt G.R. Gopinath, Managing Director, Air Deccan. "Most airlines overbook on certain routes and in certain time slots, based on historical data, to optimise seat usage. But Air Deccan simply does not overbook, as a policy," he adds. Gopinath also claims that most of the cases (of passengers being turned back at the counters) were the result of a software error. He explains that Air Deccan was using a booking engine powered and managed by InterGlobe Technologies. "Once the InterGlobe Group started its own airline (Indigo), we felt vulnerable because our competition potentially had accesses to all our data," says Gopinath. As a result, he adds, the contract between InterGlobe and Air Deccan was terminated and the airline migrated to a new system on February 27. InterGlobe Technologies CEO Vipul Doshi counters by pointing to an Air Deccan statement which said that "Till February 27, 2007, we have never had a single instance of overbooking." Gopinath says it may be "more the case of shoddy work rather than a deliberate attempt," adding that a legal arbitration has been set into motion between the two parties.

Industry watchers say typically about 2 per cent overbooking is done internationally. Says Kapil Kaul, CEO, Centre for Asia Pacific Aviation India: "Indian budget airlines have not successfully communicated the value proposition they offer." Air Deccan will be probed by the Directorate General of Civil Aviation-something the airline has welcomed.

-T.V. Mahalingam

Steel Scrap
How much does JSW really owe the state government?

JSW's Sajjan Jindal: Blame game

Karnataka and the northern town of Bellary, where steel major JSW Steel has invested around Rs 15,000 crore in a 7 million tonne (mt) downstream unit, is metamorphosing into a battleground of sorts between the industrial conglomerate and the state administration. According to K.H. Patil, the leader of the Opposition in the Karnataka Assembly and a former minister, the steel maker hasn't paid around Rs 1,000 crore in outstanding dues from mining operations conducted by Vijaynagar Minerals, a joint venture with the public sector Mysore Minerals (MML). The Karnataka government, meanwhile, estimates the shortfall more conservatively at around Rs 118 crore, and JSW Steel even less at just Rs 11 crore. "The government had committed captive mining production to us, but they allotted mines in Bellary to state-owned National Mineral Development Corporation instead. They later saddled us with Mysore Minerals (MML) facilities, which were nearly defunct," says Vinod Nowal, Executive Director, JSW Steel.

He contends that not only was the company compelled to develop these mines (and pay a total of Rs 120 crore to upgrade its infrastructure) the quality of ore (60-61 per cent iron content, compared to 65 per cent preferred normally) was also sub-standard. JSW Steel officials say MML had asked for a payment of Rs 180 crore some months ago, assuming Rs 300 per tonne was levied on the 6 mt mined by the steel maker. "This charge of Rs 300 is for premium quality (65 per cent iron content) ore, but what we get is much lower standard," says Nowal. Already, JSW has paid an upfront fee based on the net present value (of ore at the site) and in addition pays Rs 1.10 per tonne to the forest department and Rs 22 per tonne to the state government to operate this mine.

The state government, meanwhile, looks set to dig its heels. "We are going as per the norms of the MoU we inked with them and will try to recover our dues," Karnataka's Industries Minister Katta Subramanya Naidu says.

-Rahul Sachitanand