New Delhi,Infrastructure development in the country is likely to take a big hit in the coming days because of higher steel and cement prices in the past weeks. According to indications in the recent past, railway projects have come to a halt, work on creation of stadium and sports infrastructure in Delhi and New Delhi for the 2010 Commonwealth Games are delayed if not at a standstill, and this is amongst the more urgent requirements.

It is pointed out that the steep hike in cement and steel prices, that is causing the infrastructure to slow down considerably. Steel contributes about 15 to 20 percent of the total cost, whereas cement contributes about 10 to 15 percent of the total cost of a project. Over the past several weeks construction prices have shot up by 10 to 15 per cent as the combination of a weak US dollar and high crude oil prices have overshadowed the erstwhile robust economy. The weak dollar and high global demand have magged to hike the prices of building materials. High fuel prices have further compounded the problems, by the cascading effect of increased transport costs. According to industry sources, in the past three months the cost of construction has already shot up by over 10 percent, with steel prices in the domestic market have gone up by 30 percent though in the last six weeks they have stabilized somewhat.

At a time when steel and cement account for almost 33 percent of input costs and every five percent escalation in the prices of these materials would increase the price of realty by Rs. 75 to Rs. 100 per sq ft. Thus, the average cost of freshly developed real estate is expected to end up 8 to 10 higher from original estimates.

Railways are finding themselves in a spot because their projects are hampered. Port connectivity links Paradeep Orissa and Krishnapatnam in Andhra Pradesh are expected to be delayed as the cost of the project have gone up by 70 percent on account of the high steel prices. There is a rethink at Rail Bhawan about how much to modify the project to bring down the costs.

It is also admitted that in turn push the delaines further. Any delay in implementing the Paradeep port connectivity line is likely to adversely impact steel projects of large private companies like Jindal, Essel, Posco and the public sector Steel Authority of India in Orissa.

The original cost for the 82 kms long broad gauge Hari Daspur Paradeep project was Rs. 444 crores which has now risen to Rs. 748 crores. The area is Posco Comparny private mining area and is facing stiff opposition from locals in Orissa who are against land acquisition by the Railways. In fact the Railways have asked the state government to intervene and expedite the acquisition process. At the same time Railways are working on a new cost reduction measure by providing level crossings in place of road under bridges on the project line. On account of these issues the project has seen only a 12 percent physical progress during the first quarter of 2008-09.

For the Krishnapatnam line, according to media reports, the project cost has risen by 60 percent from Rs. 469 crores to Rs. 743 crores. The new line is expected to connect according to Railway Ministry information, Obulavaripalle and Krishnapatnam port, providing a rail link to the iron ore belt of Hospet and Bellary in Karnataka. According to the prearranged schedule phase I of the project was to be completed by June 2008 but there has been just over 50 percent physical progress so far. Closer home in Delhi, there are problems galore because of the hike in cement and steel prices. With the commonwealth Games of 2010 just over two years away, work on the five major stadium in the Capital that will host more than half a dozen sporting events seem to be moving at an extremely slow pace.

A status report prepared by Central Public works Department which has been entrusted with the task said as of May 2008 less than 50 percent of the work has been completed in all the five stadium. The report had been submitted to Ministry of Youth Affairs and Sports.

CPWD is developing five stadiums at a cost of Rs. 1,565 crores and include the Jawaharlal Nehru Stadium, Major Dhyan Chand National Stadium, Dr. S P Mukherjee (Talkao Talkatora) Stadium and Swimming Pool, Indira Gandhi Stadium and Dr. Karni Singh Shooting Range. Senior officials on Urban Development Ministry had admitted to the media on condition of anonymity that the work had slowed down in the beginning of this year because of the rise in cement and steel prices. The supply was not enough as compared to the demand. This had resulted in some delay but now the pace is said to have picked up though works are not even near the half-way mark.

The newly appointed Minister of state for Steel Jitin Prasada, in his interaction with the media in mid June chooses to paint a positive picture of the current scenario. He has claimed that last month (in May) the representatives of Indian steel industry met the Prime Minister and they voluntarily agreed to roll back the prices of flat steel by Rs. 4,000 and long steel products by Rs. 2000 tonnes. They also agreed to maintain the price level for a period of three months.

He said while in the international market the prices have continued with their upward trend, the proactive role of his Ministry has ensured that the prices of steel in the country have actually come down in the last one month. In fact he said, ministry reports say the prices in the last two weeks for the long products in the four markets of Kolkata Mumbai Delhi and Chennai have fallen in the range of 18 to 15 per cent and the market price for flat products have fallen upto 10 percent during this period.

Elaborating on the reasons for the rise in steel prices he listed rise in raw material prices, strong demand in the international and domestic markets and uptrend in the global steel price. The mismatch in demand and supply is considered to be the main reason for the rise in steel prices. There is a substantial gap between the growth rate of our production and consumption, with the former registering a 5.2 per cent growth and the latter 11 percent during 2007-08. Also there is a spurting international price for iron ore and coking coal, which are the basic materials for the production of steel.

Source - NPA

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