By Sujeet Kumar,

Raipur, Feb 27 (IANS) Indian steel producers have asked Finance Minister P. Chidambaram to lower the interest rate regime in order to facilitate investments of $500 billion in the manufacturing and infrastructure sector over the next five years.

In a presentation to the finance minister ahead of the budget, which will be presented Wednesday, the Indian Steel Alliance (ISA), an apex body of leading Indian steel makers, said the soaring interest rate was acting as a "dampener" on their investment plans.

"Even today, the real interest rate in India is two-three percent higher than the global average rate. If we allow interest rates to go up further, the resurgence in industrial activity leading to industrialisation of India will elude us once again," the presentation said.

ISA, which promotes steel usage as well as the development of the steel industry in the country, has strongly appealed to the government to maintain status quo on import duty on steel.

To boost competitiveness, it has also asked the government to correct inverted duty structure by reducing the customs duty on raw materials such as limestone from 12.5 percent to two percent, ferro alloys 7.5 percent to two percent and graphite electrodes from 12.5 percent to two percent.

"The rapid industrialisation of the economy will require more and more steel, a major input for the manufacturing sector and construction. It will also be required to grow by around 12 percent per annum far surpassing the National Steel Policy target of 110 million tonne per annum (mtpa) of steel capacity to reach 175-200 mtpa by year 2020," the document, made available to IANS, stated.

"The steel industry has already seen the announcement of over Rs.4 trillion worth of investment in new capacities over the next 15 years. The current contribution of iron and steel sector to GDP is around 1.5 percent which is set to double in the next 10 years," it added.

Steel makers have also strongly conveyed their concern over rising export of raw material and stated that it can slow down India's booming steel industry.

According to the ISA, the Indian industry is facing a huge problem in terms of infrastructure that is slowing down its rapid pace of development.

"The country needs to create infrastructure in advance for enabling large projects to come up," said ISA.