Chennai, July 3: Habits die hard, or so the saying goes, and it fits the cement manufacturers in the south perfectly. These players, who are enjoying the fruits of cartelisation, having pushed up cement prices from around Rs 140 per bag to Rs 165 per bag in just 40 days, are finding it difficult to restrain themselves.What else will explain the further sharp increase of Rs 15-17 per bag, effective July 1, 1998. Moreover, the companies have indicated to their dealers that a further hike of Rs 6 per bag in another 10-12 days cannot not be ruled out.Cement manufacturers in Tamil Nadu, who were till recently avoiding shutdown in production, have finally decided to implement it. Cement plants in the state would stop production for six day in a month. Plants in Andhra Pradesh have already cut production seven days a month.These measures have been initiated to ensure that the prices hold at current levels. Prices of all brands have been uniformly jacked up in Tamil Nadu, Andhra Pradesh, Kerala andKarnataka. In Chennai, India Cements' Coromandel brand now costs Rs 177.00 per bag (old price Rs 162.00), Madras Cements' Ramco brand costs Rs 172.00 (Rs 157.00), Larsen & Toubro, Rs 179.00 (Rs 163.00), Raasi Cement's Raasi brand, Rs 170.00 (Rs 155) and Sri Vishnu Cements' Vishnu brand, Rs 167.00 (Rs 152.00).Industry sources say this hike will be final, as the series of increases in the last two months (see table) have ensured that not only are costs recovered but significant margins are obtained. Reports of a further increase of Rs 6 could be part of the strategy to improve volumes, which have declined after the recent increase.Insight - rising power, coal and freight The attempts of southern cement manufacturers to raise their selling prices, especially ahead of the monsoon season, when the demand for cement is low, certainly points to cartelisation, although rising input costs of power, coal and freight may have forced the players to do so.Whenever commodity pricesare on a downtrend, it is the practice worldwide for producers to band together - try and hike prices. For example, in 1994, major aluminium producing countries ganged up to reduce production to prop up the falling prices. Similar steps have been taken in the case of oil. Southern cement producers will, however, be able to raise prices only to the extent of the freight costs from other regions. If prices go beyond these costs, cement from other regions will flood in. However, there seems to be a clear case for protection of consumer interests by an investigation under the MRTPC Act.
