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Construction : Web Exclusive | February 2018 | Source : CW-India

Builders Association of India Demands roll back of iron and steel price hike

Threaten to stop work on all construction projects if the iron and steel price hike is not rolled back

The Builders Association of India, the apex representative body of civil engineering construction companies including small medium and big contractors working on major construction and infrastructure projects including roads, irrigation, government housing schemes for poor etc, demanded the rollback of iron and steel price hike. The prices of iron and steel has gone by over 60 per cent in the recent times, making all projects and construction unviable. The meeting was chaired by SN Reddy, National, Vice President, Builders Association of India, along with B Sugunakar Rao, State Chairman, Telangana at BAI, with all the association members. The members demanded the government to fix the basic minimum price of iron and steel on all existing projects as such unprecedented hike in input costs add additional financial burden to the existing contract work and make the projects unviable.

Iron and steel, cement are the most important inputs required for any construction project. The price of iron and steel has increased from Rs 30,000 per tonne six months ago to about Rs 48,000 to Rs 50,000 per tonne today, without any such steep hike in input costs. The steel manufacturers have formed a cartel to effect a 60 per cent increase in the price of iron and steel in the last few months to maximise their profits from the enhanced construction activity. 

High prices of steel is giving a tough time to the construction industry. The main reason behind this unwarranted price hike is the increase in the international demand. Steel plants which were shut by the Chinese Government, in the wake of increasing air pollution has resulted in declined Steel export from the country.  The Indian steel manufacturers have started exporting steel to China, creating scarcity in the local market and thus leading to high prices.

Speaking on the occasion SN Reddy, Vice President (National), BAI, said “All the members of the association who are executing the government and private projects are facing lot of difficulties as the projects are becoming un-executable due to the huge surge of 60 per cent in the price of iron and steel. This hike will force us to stop work on the projects unless the government intervenes to fix the steel costs provided to the contractors. Even other infrastructure projects like road, dams, irrigation are becoming unviable as we do not factor such price hikes and the complete construction activity will come to a stand-still till government intervenes to effect a roll back of price hike. This will have the worst impact on the two-BHK scheme by government of Telangana, which were being implemented by some of our members at a rate of Rs 800 per sq ft as against a cost of Rs 1,100 per sq ft just to support the government in the mission to provide Housing for All.”

Adding to this, B Sugunakar Rao, BAI State Chairman, Telangana State, said, “The construction industry is the second largest employment generator to the country, just next to agriculture. We operate on narrow margins. Such steep price escalations disrupt the project costs and make it unviable. We urge the government to fix the price for iron and steel for all government project work to the cost at the time of contract to help us execute the projects. Moreover the payments to the government projects should be released on time as delay in payments for projects under execution or recently completed is adding to our problems. If this is not taken into account the work on the projects like low cost housing projects will have to be stopped. We urge the government to take immediate appropriate action to save the construction sector else lot of the contractors will face severe financial problems.”

Apart from the real estate sector which is worst hit related industries which use steel as raw material are affected. Fixing prices of the finished products has become a tough task for the industries. Frequently changing the price of end products is difficult and the change in price of raw material is giving a tough time to the industry.

The industry is demanding from the government to set up a committee to regulate the prices of steel. Prices need to be regulated; otherwise frequent rise in the prices will create havoc for sector resulting in a total shutdown and negative viral effect on the economy.
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