Builders’ body blames it on cement cartel

The Builders’ Association of India (BAI) has strongly opposed regular hikes in cement prices that are hitting the construction industry hard even as it faces sluggish prospects.

The BAI has demanded setting up of a strict regulatory authority on the lines of the Securities and Exchange Board of India (Sebi) that ensures that there are no unfair trade practices by the cement industry.

The BAI said that the Indian cement industry appears to have ignored an early order of the MRTP Commission as also pleas from the construction sector and has continued with price hike to the detriment of housing and infrastructure markets.

“On February 29, 2008 the commission held that all cement producers with the exception of one, acted in collusion to raise the price of cement in Jabalpur during July-December, 2000 and January, 2001 with the Cement Manufacturers’ Association of India (CMAI) providing a common platform for the purpose. The subsequent and ongoing price hikes have hit the construction industry hard,” said Anand Gupta, BAI president. 

The cement industry is an exception to the slowdown witnessed in the Indian economy since October, 2008. While price reductions have been seen all around with a view to stimulating demand, cement manufacturers have resorted to three price increases starting from February, 2009. Hikes are in the range of Rs15 to Rs30 per bag across the country.

“By and large, cement firms have mainly been producing blended cement by adding 25% fly ash to Portland cement. This kind of blending costs nothing and production costs are reduced in the process, which is not passed on to the consumer,” said Mahesh Mudda, chairman of BAI (Mumbai). “This is considered a clear case of unfair trade practices amounting to cartelisation,” Mudda said.

“Though there has been a drop in property prices in the recent few quarters, the prices of cement (above Rs250) have not reduced in line with other goods due to cartelisation,” said Rajesh Vardhan, MD, Vardhman Group. Cement prices have gone up by Rs 5-7 over the last few months coupled with reduction in cement production. There is a need to have a re-look at prices of all the materials used in the real estate industry at a time when margins are decreasing and developers are looking for ways to cut costs,” Vardhan added.

According to Central Statistical Organisation forecast in January 2009, growth has declined sharply from 9.8% in 2007-2008 to 6.5% in 2008-2009.

The housing sector consumes 55% of cement, while infrastructure sector takes 35%, the balance 10% goes towards other cement products.