Mumbai: The steel ministry is considering a ban on the export of iron ore and flat steel products in a bid to stem the rising prices, which is adding to the current inflationary spiral.

''If the prices of flat steel products are not being kept in check, either the export duty could be increased or a ban on exports could be considered to increase domestic availability," the committee of secretaries (CoS) observed during its last meeting.

Steel producers are now free to raise prices after the expiry of a three-month period during which they had lowered prices by Rs4,000 a tonne and agreed to hold prices, following a meeting with prime minister Manmohan Singh on May 7.  They are expected to raise prices after August 7.
 
Steel minister Ram Vilas Paswan, meanwhile, said the government may now leave pricing issues to the steel companies.

''We do not want the industry to incur losses. But, it is our duty to ensure that consumers do not suffer as a result of an arbitrary price hike, which is disproportionate to the increase in raw material prices," he said at the Indian Steel Conclave, organised jointly by Ficci and the steel ministry.

The government may instead consider a hike in export duty on flat steel products and subsequently explore the possibility of banning iron ore exports to increase domestic availability.

Steel prices have shot up by around 50 per cent since January this year, adding to the double-digit inflation, which is hovering at a 13-year high near 12 per cent.

Government had, on June 13, exempted flat rolled products, including galvanised products, pipes and tubes from a 5 to 15 per cent ad-valorem export duty.

The rate of export duty on long products such as bars and rods, angles, shapes, sections and wires was also increased from 10 to 15 per cent and a 15 per cent ad-valorem duty was imposed on iron ore.

"The unprecedented jump in raw material prices coupled with a robust demand have led to an all-time high steel prices," said B Muthuraman, managing director of Tata Steel, the country's largest steel producer in the private sector.

Muthuraman added that while the primary steel producers agreed to cut prices by Rs4,000 a tonne in May, there was no corresponding action from the downstream industries. ''Final product prices, which actually impact inflation, have not come down," he said.

The steel industry is in an unenviable position with the cost of imported steel ruling higher at about Rs15,000-20,000 a tonne. ''It looks that the government's policy is to encourage a better price to companies based outside the country," Muthuraman said.

The inability to pass on the price increase would reflect on the return on investment for steel companies in 2008-09, he added.