The Hindu Business Line : Cement price control under Govt consideration

18 G track
Provides for control on prices and supplies of industrial products without bringing them under Essential Commodities Act under which powers are vested with States.

Mr Ashwani Kumar

Alok Mukherjee
Ambarish Mukherjee

New Delhi, May 1 Serious in its intent to rein-in cement prices, the Government is contemplating using a practically abandoned provision of the Industries (Development and Regulation) Act, 1951, which empowers it to regulate prices and supplies of industrial commodities.

This provision, Section 18G, continues to be on the statute books but has not been used for almost 19 years after a Cabinet decision in 1989 not to invoke it. Section 18G provides for control on prices and supplies of industrial products without bringing them under the purview of the Essential Commodities Act under which powers are vested with States.

Contacted by Business Line for a confirmation, the Minister of State for Industries, Mr Ashwani Kumar, said his Ministry was conducting a study on whether the cement industry was into cartelisation and profiteering. “Our Ministry is analysing the pricing of the cement industry,” he said.

The analysis is being done on the basis of data provided by public sector Cement Corporation of India, the Bureau of Industrial Costs and Prices, the National Productivity Council, Cement Manufacturers Association and also private players. The departmental exercise is expected to be completed in another two to three days.

“If there is any prima facie evidence, we will resort to the strictest administrative measures to ensure fairness and reasonability of prices,” he said.

The Minister made it clear that the Government was not intending to curb profits by industry; nor was it keen to go back to the licence control Raj, but industry too would have to keep the interests of the consumers in mind. “The industry should take the Prime Minister’s call to refrain from windfall profits in an era of shortages very seriously,” he added.

Defining profiteering

Explaining what would be profiteering, the Minister said that “if we find that the companies are making a windfall profit of 30 to 40 per cent instead of the normal 10-15 per cent, it would be taken as profiteering.” Cement prices have increased by 48 per cent between January 2006 and March 2008, he added.

Currently, cement prices are ruling in the range of Rs 190 to Rs 250 for a 50-kg bag. “I have asked for reasons for such variations across States. The industry keeps saying it is increase in transport cost but that is not convincing,” Mr Kumar said.

The Minister pointed out that the domestic cement industry has a capacity of 168.31 million tonnes a year and plants were spread over 19 States. “So the cement produced in north, south or the eastern region gets consumed within the region, which does not involve huge transport costs,” he explained.

Taking note of the fact that despite banning exports cement producers had not cut prices, the Government was putting infrastructure in place to increase imports from Pakistan which has excess annual capacity of around 6 million tonnes.

“The Committee of Secretaries has decided to set up warehouses at Wagah (Punjab) border and increase supplies of rakes and trucks to ensure seamless supplies from there. We expect around 36,000 tonnes from there in the next two months,” he said.

Unlike steel, in the case of cement, the demand-supply gap is not very high. In 2007-08, India imported 4.7 lakh tonnes while exports stood at a whopping 36.5 lakh tonnes, the Minister said, adding that the recent ban on exports would also help bring down prices in the next few weeks.