Cement cartel on a ‘justification’ drive

Justifying the price hike, CMA said nearly 30 cement companies are in the red out of which more than a dozen have become Bureau of Industrial and Financial Reconstruction (BIFR) cases. Many cement units in the country are thereby seeking buyers. The cement companies in the red include ACC Ltd, Ambuja Cement Rajasthan, Chettinad Cement, Indo Rama, J K Udaipur Udyog, Kalyanpur Cements, Kanoria Industries, Narmada Cement, Panyam Cement, Orient Paper and Industry, Orient Paper and Industry, Sri Vishnu Cement, Ambuja Cement Eastern, Andhra Cements, Binani Cement Ltd, Birla Corporation Ltd, Gujarat Sidhee Cement, JK Corp Ltd, J K Synthetics Ltd, Mangalam Cement, Prism Cement Ltd, Raymond Ltd, Saurashtra Cement, Priyadarshini Cement, Zuari Industries Ltd and U P State Cement Corporation.

Cement companies under BIFR include Andhra Cement Company Ltd, IDCOL Cement Ltd, Kanoria Industries Ltd, Kalyanpur Cements, Shree Digvijay Cement Company Ltd, Mangalam Cement, Ambuja Cement Eastern Ltd (earlier Modi Cement), Gujarat Sidhee Cement, J K Cement, Cement Corporation of India and Narmada Cement.

According to a CMA study, between 1950 and 1989, when the cement industry was not decontrolled, no cement plant was economically viable. Growth in the industry was insignificant. The industry during the period was rife with all kinds of ills – hoarding, black marketing and profiteering. If the current trend of erosion of net worth of cement companies continues, the industry might regress into the dark ages. In the last three years, following cement units have been sold – Narmada Cement, Modi Cement, DLF Cement, Raasi Cement, Sri Vishnu Cement, Visaka, CCI-Yerraguntla, Sri Digvijay Cement, TISCO Cement, Raymond Ltd (Cement Division) and Zuari Cement (50 per cent).

Indian cement industry at present consists of 53 large cement companies and 113 cement plants. The capacities of these companies also vary between 1million tonne (MT) to 8 MT. In addition, the country has nearly 150 mini cement plants with a cumulative capacity of almost 10 MT. ICICI had taken up an independent study of the cement industry during 1991 where it recommended fair prices of cement in the ensuing years. "If only cost increases are updated, cement price should range between Rs 200 to Rs 250 per bag in different metro locations across the country," it claimed.

"Cement prices even today continue to be less than the fair price recommended by ICICI a decade back," says CMA. The cement price hike will hardly affect the retail consumer, CMA points out adding that for someone who wants to buy a 500 square feet apartment, the cement price hike will increase the cost by just around Rs 7,000. For large infrastructural projects the incremental costs would be even less.