Cement firms talk tough on price cuts

The statement from the industry came minutes after Finance Minister P Chidambaram said around noon that the government was trying to persuade cement companies to lower prices. On Thursday evening, India's largest cement manufacture, ACC, which accounts for over one-tenth of the market, had announced its intent to freeze prices for two-three months.

Instead, cement companies demanded "concrete" assurances from the government regarding excise duty reduction. Companies want the Centre to allow them 55 per cent abatement on the duty paid by them.

At present, companies have to pay excise duty of Rs 350 a tonne in case the maximum retail price for a 50-kg cement bag is Rs 190 or less. For the more expensive varieties, the levy is Rs 550-600 a tonne.

"Freezing prices is not the industry's call. It is an individual decision and the cement firms are behaving in their own way," said H M Bangur, president of the Cement Manufacturers' Association and the managing director of Shree Cement.

According to a senior executive of a southern cement major, so far, the government has not come up with any specific proposals. "If they (government) give some relief on excise, the reduction will be passed on to the consumers," the executive added.

Top officials of the Birla group too said that cement companies would take independent decisions on pricing and added that there is constant input pressure, which is shrinking the margins.

The stance adopted by the cement companies is akin to the approach followed by steel firms, which were refusing to lower prices despite the government's repeated requests. It was only after some tough talking and fiscal steps to increase supply in the domestic market that steel companies agreed to lower prices.

On April 29, Chidmabaram had announced an increase in the excise levied on cement bags that cost over Rs 250. Cement companies have, however, not raised prices since the effect was estimated at Rs 2-3 per bag.

At present, the average price for a 50-kg bag of cement is estimated at Rs 230, compared to Rs 165 around two years ago. In Mumbai, the price of a bag of cement has shot up from Rs 260 at the start of the year to Rs 275 now. The Congress government in Andhra Pradesh has managed to convince manufacturers to sell cement at Rs 200 a bag, with a marginal concession in case of sale in far-flung districts of the state.

The 189 million tonnes domestic cement industry is being accused of cartelisation.