The rising steel prices is a matter of concern for every industry. The first to feel the heat is unquestionably the Railways. The Indian Railways often quipped as the "Spine of the Nation",is probably moving into a swamp with many of its contractors threatening to stop further construction activities unless they were covered for the uncertainties pertaining to Steel prices.
Vendors who supply finished steel and other components used for manufacturing coaches and wagons, too, are walking out of contracts they had signed with the railway ministry.
Rising inflation has been precarious and has left everybody pondering for a solution. However,the price of steel has been rising faster than the overall inflation. The annual growth in the index for steel was almost four times the annual rate of inflation at 7.14%.
The result has not been sweet for the world's largest employer.The Indian Railways runs the risk of a major setback to its plans to ramp up freight capacity, which is currently operating at its peak, through a big step-up in capital expenditure. In the railway budget this year, minister Lalu Prasad had said that capital expenditure would be increased from Rs31,783 crore in 2007-08 to Rs37,500 crore in the current fiscal year. The railways has already started preparatory work to construct the dedicated freight corridor, a 2,700km railway grid that will connect Mumbai, New Delhi, Kolkata and Chennai. And then it all comes crumbling down like a cookie. Rumours are abound that there has also been a shortage of steel for rails, for completion of several projects that are underway.
Steel prices have a tendency of pulling up the prices of everything else. Being the backbone of the economy, the Railways will be forced to increase their freight charges if the steel prices don't cool off. Almost two thirds of the nations freight is carried by the Indian Railways. So the next time you find that milk prices have increased, you might have a reason to blame steel.