Builders and cement companies are at war over the rising price of cement. A verdict is expected next week from the Competition Commission of India (CCI), on a charge made by real estate dealers, of cartelisation among cement companies.
Builders say cement makers have increased prices by 50 per cent in the past six months and as much as 20 per cent after the Union Budget, blaming collusion for the supply problem. Cement companies say the complaint is “ridiculous”, as the prices are controlled by factors like demand and supply, railway freight rates and excise duty.
A 50-kg bag of cement used to cost Rs 170. It went up to Rs 250 before the Budget and costs Rs 300 now, said R K Arora, chairman, Supertech. “Excise duty went up by two percentage points but cement prices have gone up by at least 20 per cent. Therefore, we are including a cost escalation clause in our buyer-builder agreement due to uncertainty in the prices,” he said.
Shree Cement managing director (MD) H M Bangur told Business Standard cement prices in the National Capital Region were not more than Rs 260-270 per bag and there was no cartelisation. “Cement is a commodity and all commodity prices move in tandem. You can’t allege (from this) that there is cartelisation,” he said.
Said Vinod Juneja, MD of Binani Cement: “Cement accounts for just three to four per cent of the cost of the whole project. What about the remaining 97 per cent?”. He denied manufacturers were holding any stocks in godowns, but admitted the increase in rail freight rates and general inflation had impacted the prices a bit.
The National Real Estate Development Council had in November moved CCI, alleging an unduly steep increase in cement prices. The installed capacity of large cement plants had increased from 223 million tonnes in 2009-10 to 234 mt in 2010-11. However, capacity utilisation in 2010-11 declined to 76 per cent from 83 per cent in 2009-10, it had said.
“Our production is in full capacity, of 85 to 90 per cent”, said the Binani Cement MD. According to him, the cement prices in Delhi and NCR are not more than Rs 260-270 a bag right now.
An Ambuja Cement spokesperson told this newspaper cement production was a cyclical business. During the monsoon in June-July, as construction falls, demand for cement also falls, thereby cooling prices, too. October to December is the peak season for construction and prices go up, he said.
Manoj Gaur, CMD, Gaursons, a Noida-based developer, said there were just 12 to 14 major companies in the cement industry, and they were able to increase prices by 50-60 per cent in a short span of time. “They shut their plants in the name of maintenance, artificially reducing supply of cement, impacting prices”, he charged.
Nayan Raheja, director, Raheja Developers, alleged cement prices were Rs 350 per bag right now from Rs 180-200 about six months before. The 14 manufacturers, he said, had stopped all supplies for a week in November.
Bangur of Shree Cement countered that there were 70 cement companies, not 12 to 14 as claimed by the developers. “Second, in the last 30 years that I am in the industry, there has been no stoppage of supply even for a single day,” he said.