Close on the heels of cutting prices by Rs 2000 per tonne, Tata Steel, on Monday, announced that it will not raise prices of its products till March 2005.

B Muthuraman, managing director, Tata Steel, said: "We will not increase prices for both our direct customers as well as retail customers till March 2005."

Tata Steel announcement assumed significance against the backdrop of rising global steel prices and large international steel companies like Arcelor and Posco already announcing price hikes for the next quarter.

Tata Steel has reduced prices of all its products by Rs 2000 per tonne, for its contracts with original equipment manufacturers. Prices in the retail segment have been retained and will not be increased during the year, Muthuraman added.

Around 65-70 per cent of Tata Steel's total domestic sales are through long-term contracts, while the balance is through a retail distribution network. Muthuraman also said that there could be a possibility that Tata Steel's share in the domestic market, would increase due to a lower price.

Steel analysts said, "Since Tata Steel is fully integrated, it can afford to sell its products at this price, even if inputs costs increase substantially. However, other players will not be able to match these price cuts, which could result in a rise in Tata Steel's market share.

The company expects to absorb the impact, of the price cut, on its bottomline. "We will be looking at cost reduction and a better product mix to maintain our profitability," Muthuraman said. The price cut will bring down Tata Steel's net realisation by 10 per cent, he added. "We will be looking at balancing the impact by pepping up our other businesses," he added.

Meanwhile, Tata Steel has said that it has submitted a proposal to the Orissa government for setting up a 6 million tonne steel plant in Duburi.

The company has planned an investment of around Rs 17,000 crore (Rs 170 billion) for the project, which includes developing iron ore mines and setting up a slab manufacturing plant.