Cement cos again building cartel: Builders
The Economic Times, April 15, 2009, Page 11
Rajesh Unnikrishnan & Mithun Roy, MUMBAI
THE tug of war between cement manufacturers and construction groups has reached a flash point with construction players seeking fresh government interference in alleged cement cartelisation move and high cement prices.
Cement and gold are the only two commodities that have seen a sharp rise in prices while other resources have fallen sharply, say people familiar with the developments.
“In January this year, the government reintroduced the import duty and countervailing duty and made cement imports dearer. During the past few months, cement companies have been increasing prices and we strongly believe that the industry is acting as a cartel,” a Builders’ Association of India senior official said.
Since January, cement makers, including big players such as ACC, Ambuja Cements, Grasim and UltraTech, raised prices by Rs 7-10 per 50-kg bag. ACC increased prices by Rs 7 per bag while Ambuja raised it by Rs 3 in April. Aditya Birla group companies, Grasim Industries and UltraTech Cement, have raised prices by Rs 5-7 per bag, dealers said. At present, retail cement prices have gone up to Rs 260 a bag, on an average.
Construction industry officials say while the domestic installed cement capacity is 205 million tonnes, the companies run at capacity utilisation of 160 mt. “When demand is strong, why are the cement companies not increasing capacity?” one official asked. Cement comprises 13-15% of the cost component of a construction project.
When contracted, Cement Manufacturers’ Association president HM Bangur declined to comment. Ambuja Cements marketing head Ajay Kapur told ET, “There is no point of cartelisation in the current market conditions. We are selling cement at the best-possible price.”
Cement analysts don’t foresee prices to soften in the short run. In the long term, however, they expect prices to fall as new capacities come up for production. The outlook for the first quarter of 2009-10 looks better than last year, and an 8% incremental growth is expected in the current fiscal year, analysts added. ACC MD Sumit Banerjee recently told ET that prices need to go up to Rs 300 per bag. “ACC’s plans to invest in creating new capacities. It will not be easy for us to go ahead without our future expansion plans beyond 2011,” he added.
In 2006, the director general of investigations and registration (DGIR) studied prices of cement over two years, 2005-06, and found that the increase in the cost of production was Rs 136.14 per tonne, or Rs 7 per 50-kg bag.
Prices, on the other hand, increased by Rs 56 per bag in Delhi and Rs 50 in Mumbai during the period. As per the Cement Manufacturers’ Association annual report for 2005-06, production rose 11.16% over the previous year.
The Economic Times, April 15, 2009, Page 11
Rajesh Unnikrishnan & Mithun Roy, MUMBAI
THE tug of war between cement manufacturers and construction groups has reached a flash point with construction players seeking fresh government interference in alleged cement cartelisation move and high cement prices.
Cement and gold are the only two commodities that have seen a sharp rise in prices while other resources have fallen sharply, say people familiar with the developments.
“In January this year, the government reintroduced the import duty and countervailing duty and made cement imports dearer. During the past few months, cement companies have been increasing prices and we strongly believe that the industry is acting as a cartel,” a Builders’ Association of India senior official said.
Since January, cement makers, including big players such as ACC, Ambuja Cements, Grasim and UltraTech, raised prices by Rs 7-10 per 50-kg bag. ACC increased prices by Rs 7 per bag while Ambuja raised it by Rs 3 in April. Aditya Birla group companies, Grasim Industries and UltraTech Cement, have raised prices by Rs 5-7 per bag, dealers said. At present, retail cement prices have gone up to Rs 260 a bag, on an average.
Construction industry officials say while the domestic installed cement capacity is 205 million tonnes, the companies run at capacity utilisation of 160 mt. “When demand is strong, why are the cement companies not increasing capacity?” one official asked. Cement comprises 13-15% of the cost component of a construction project.
When contracted, Cement Manufacturers’ Association president HM Bangur declined to comment. Ambuja Cements marketing head Ajay Kapur told ET, “There is no point of cartelisation in the current market conditions. We are selling cement at the best-possible price.”
Cement analysts don’t foresee prices to soften in the short run. In the long term, however, they expect prices to fall as new capacities come up for production. The outlook for the first quarter of 2009-10 looks better than last year, and an 8% incremental growth is expected in the current fiscal year, analysts added. ACC MD Sumit Banerjee recently told ET that prices need to go up to Rs 300 per bag. “ACC’s plans to invest in creating new capacities. It will not be easy for us to go ahead without our future expansion plans beyond 2011,” he added.
In 2006, the director general of investigations and registration (DGIR) studied prices of cement over two years, 2005-06, and found that the increase in the cost of production was Rs 136.14 per tonne, or Rs 7 per 50-kg bag.
Prices, on the other hand, increased by Rs 56 per bag in Delhi and Rs 50 in Mumbai during the period. As per the Cement Manufacturers’ Association annual report for 2005-06, production rose 11.16% over the previous year.
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