Cartelisation is an impractical theory, say top cement firms

At a time when the government is increasingly intervening in the domestic cement industry, the country's top two cement manufacturers, ACC and Ambuja Cements, dismissed the measures as knee-jerk reactions and ruled out any cartelisation in the industry.

The top officials of the companies opined that instead of slinging mud at each other, the industry and the government would have to sacrifice and negotiate.

"Cartelisation can never take place in the cement industry. Had there been a cartel, the industry would not have become sick earlier," said A L Kapur, managing director, Ambuja Cements.

They said that in the Wholesale Price Index (WPI), cement contributes little, that is, just a factor of 1.73. In the last one year, the cement prices have increased by 2.67 per cent, much lower than the current inflation rate, they added.

"Who looks after the industry when it is bleeding? Cartelisation is an impractical theory as there are many players in the country. For WPI, retail prices are taken into consideration. Even if we reduce the prices, it will not reach the consumers unless retailers do so," said Sumit Banerjee, managing director, ACC.

The two cement giants said the measures by the government (especially, the recent ban on cement exports) does not send healthy signals to the overseas market. It will reduce overseas business. "We have our long-term international contracts for supply," they said.

"No product other than cement attracts excise duties on MRP. Why can't they (government) reduce taxes? The industry has already sacrificed a lot. We do not have abatement on excise duties. If we get that, we will pass it on," said Kapur.

Presently, the excise on a tonne of cement is Rs 600. It could come down to at least Rs 400 with abatement. Kapur said giving concessions to imported cement was not fair. "Give us the same concessions and we will sell our cement at the same rates," he said.

In the last 2-3 years, the cost of setting up a new plant has jumped from $100 a tonne to $210. Where would the investment come from, they asked.

On the price outlook for the current year, Kapur said it seemed to be too big a burden. "We are already under great pressure. We have no intention to raise the rates and we will also try to absorb higher costs by improving our efficiency and increasing our output."

However, he added there was a limit of absorbing input costs and ultimately the market dynamics would decide the prices.