Federation of Indian Chamber of Commerce & Industry said that the export tax on steel could shrink profit margins and force steelmakers to defer expansion plans worth a trillion rupees.

FICCI said that "The export duty and voluntary price reduction by steel industry would significantly impact the margins of steel sector that could affect their future investment plans."

FICCI said that finished steel output grew by 5.1% YoY in April 2007 to March 2008 period, slowing from previous year's growth of 13.1% and profit margins at 105 iron and steel firms have dipped as a tight interest rate regime raised borrowing costs.

It added that investment projects announced recently by companies like Sterlite Industries, TATA Steel, JSW Steel and Mittal Steel could take backseat.