Cement cartel plans fresh hike, builders to stop work

Cement cartel plans fresh hike, builders to stop work
ENS ECONOMIC BUREAU

MUMBAI, JAN 1: Tightening its grip over the market, a cartel of cement companies have decided to increase prices by Rs 3 per 50 kg bag from tomorrow. With this, cement prices in the Mumbai market will now be in the band of Rs 190-195 range while dealer prices will now be around the Rs 184-mark.

This price hike comes after the last hike slated for the last week of December was put on hold by cement companies. They had hiked prices twice in the last two months and even stopped supplies for a week earlier. Cement companies are eyeing the government's plans to start work on Prime Minister's golden quadrangle project which would increase the offtake of cement and other products. ``The biggest hit would be taken by the Government of India which is planning to start work on various road projects. It's obvious the cost of construction for these projects would shoot up by several crores of rupees,'' said an industry analyst.

Reacting to this constant increase, the Builders Association of India (BAI) has threatened to stop all civil works from January 7, if the cement manufacturers do not put an end to cartelisation of cement. BAI spokesperson Vimal Shah said that a meeting of all the BAI representatives has been called on January 5 where a plan of action against the unfair practices adopted by the cement manufacturers to hike cement prices would be taken. Members of the construction industry had announced last week that they would boycott cement purchase from the cement manufacturers.

But there has been no reaction from cement manufacturers till now. "Cementmanufacturers are indifferent to the whole problem and have not even bothered to attend the meetings organised by the BAI," Shah complained. ``We wanted to sort the matter with the manufacturers across the table,'' he said.

The impact due to the boycott will be felt in the next three months, Shah said. Whatever cement has already been purchased will last till then, according to construction industry sources. "The immediate impact will be on government projects as they work on fixed cement price and the volume consumed is very high," Shah said. Government projects to the tune of Rs 10,000 crore are likely to be affected due to the frequent price hikes.

But the worst affected in this issue will be daily wagers. If civil works are stopped, over one lakh people will be affected in Mumbai alone, informed Shah. "The construction industry is the second largest employer after agriculture," Shah said.

Construction industry sources said that if the Government of India does not intervene and resolve the problem, the burden of the cement price will ultimately be passed on the people by increasing real estate price. Half a cement bag is used per sq ft of construction and hence the builders will have no option but to resort to a steep hike, cautioned industry sources.

Industry sources pointed out that the price rise which was initially slated for Rs 5 had been slashed to Rs 3 per bag and also phased out to sustain the demand situation. As a Gujarat Ambuja official said," the demand situation is also picking up." Leading cement manufacturers - ACC, Gujarat Ambuja, Grasim and Larsen & Toubro (L&T) - have been raising prices since November amidst allegations of cartelisation.

Builders and contractors have recently threatened to stop cement purchases unless the central government takes action against the manufacturers for "artificially hiking cement prices". At a recently held special general meeting of the Joint Action Committee - comprising Builders Association of India, Maharashtra Chamber of Housing Industry and other associations - the members decided to move the Central Government to initiate action against cement makers under the Monopolies and Restrictive Trade Practices (MRTPC) Act for "unfair business practices". Industry sources, however, pointed out that it would be difficult for builders to stop work which have time-bound contracts. However, private builders may resort to such a move if prices go up further.