In a move that is likely to result in global steel prices firming up, the Organisation for Economic Co-operation and Development has decided to work towards a consensus on eliminating subsidies provided to the steel industry by member-countries.

The elimination of subsidies will reduce global steel production and help in improving steel prices. It will also increase steel exports from countries like India.

The decision was taken in a recent OECD meeting held in Paris. The member-countries noted that government aid in the form of subsidies had been the cause of over-production and low prices. The subsidies also led to a distortion in the market by directing investment to steel at the cost of other industries, the participants noted.

As per the agreement, OECD members will also look at ways to shut unviable steel units in phases. Although the Paris meet did not mention a figure, there is speculation that capacity to the tune of 115 million tonnes will be closed in OECD member-countries.

"The decision will have a positive impact on the global steel industry and its prices. The cut in production will ensure that global prices stabilise, which in turn will have a bearing on domestic prices," a senior government official said.

As per estimates, the global steel industry has an over-capacity of about 200 million tonnes. Global demand is at around 800 million tonnes annually.

At the Paris meet, the OECD members highlighted that the situation in the steel markets remained serious despite prices showing signs of recovery.