New Delhi, Apr 29: After intense battle of nerves with the steelmakers, the government today imposed up to 15 per cent export duty on various steel products to contain rise of prices of the alloy, a move that will hit industry hard.

Replying to the discussion on the Finance Bill 2008-09, Finance Minister P Chidambaram announced imposition of 15 per cent export duty on semi-finished steel products and 5 per cent duty on galvanised sheets to disincentivise exports to contain the domestic demand-supply mismatch and consequent rise in steel prices.

He also announced reducing to zero the customs duty on basic steel-making inputs like metcoke, ferro-alloys and zinc, while abolishing the Countervailing Duty on construction products like TMT bars.

These announcements by the Finance Minister has set to rest all speculations on impending fiscal measures being mooted by the government to contain rise in steel prices which have contributed 21.3 per cent to the current inflation in the country.

These measures were recently discussed at length in the inter-ministerial consultations where Steel Minister Ram Vilas Paswan, Commerce and Industry Minister Kamal Nath and Mines Minister Sis Ram Ola apart from Chidambaram deliberated on the proposals of the Steel Ministry to contain spiralling steel prices.

The Finance Minister had insisted on a 'revenue neutral model' to offset the losses of about Rs 5,000 crore that will be caused by these fiscal measures.

The government had earlier made its intentions to crack the whip on steelmakers by abolishing export incentives offered to them in the form of Duty Entitlement Pass Book (DEPB) scheme, which is likely to deplete the coffers of the steelmakers by about Rs 600 crore.

Incensed at the spectre of a hit on their bottomline, the steel industry shot back saying lowering of exports could adversely affect their competitiveness and lower the country's reputation in the international markets.

"I don't know whether it will increase availability of steel in the Indian market because the steel companies have to maintain certain obligations in the international market and those long-term contracts have to be fulfilled. If they do not, they stand to lose the market on a long-term basis. Also the country's reputation gets adversely impacted," Indian Steel Alliance President Moosa Raza told PTI.

The steelmakers also have to honour obligations under Export Promotion Credit Guarantee (EPCG) scheme. So, as a result it will reduce the market for the steelmakers who are in the export business, he pointed out.

"Everybody will then be affected. There is no capacity in India to absorb certain products which are geared only for the export markets, especially in flat products," Raza argued.

In the see-sawing battle of steel prices, Steel Minister Ram Vilas Paswan had asked Prime Minister Manmohan Singh to set up a regulator in the sector to monitor prices as well as impose measures to disincetivise steel exports.

Recently steel producers had announced their intention to hold on to their price line for the next 2-3 months, after the Prime Minister had asked them to take a long term view and not fall prey to temptation of seeking windfall gains from market manipulation in a period of excess demand.