The Hindu Business Line : `Cement prices to remain firm till March 08'

The India Cements Vice-Chairman and Managing Director, Mr N. Srinivasan, said that the monsoon has had no effect on prices. But, he added that post-monsoon there could be an upward movement in cement prices, particularly in the western region.

He further pointed out that cement prices are expected to remain firm till March 2008. Excerpts from CNBC-TV18's exclusive interview with Mr Srinivasan:

How are things picking up post monsoon this time around, both in terms of demand and prices?

As it happened last year, this year too, we have seen that the monsoon has had no effect literally on prices. The demand has been sufficient for the price to be maintained. Post-monsoon, we expect an upward movement in prices particularly in the western region.

What is the average price across the region where you sell?

The price in Kerala today is still around Rs 215, in Banglore it is Rs 220, while in Chennai it is around Rs 200. In Hyderabad, it is around Rs 175, in Kolkata it is Rs 200. Mumbai has now moved up to Rs 225-230, and in Delhi it is around Rs 200.

Primarily, the demand has grown by 10 per cent from April to August. If at all there is one region, which has been slow this year, then it is the East. But even there, the demand is picking up now. I predict that we would end the year with 10 per cent plus growth.

How much do you expect to see by way of price appreciation in the next few months?

In Mumbai, the retail prices went up to Rs 240-250 just before monsoon. It is most likely that post monsoon the demand might be little bit ahead of supply immediately. There is not much capacity coming on stream next year. So I think up to the end of this year and maybe up to March 2008, there will be a firm pricing trend across the country.

Do you expect to see any hiccups in terms of Government intervention, if as a management, you go ahead and hike prices?

It is actually not the management that hikes the price. In a sense, we are totally market driven. It is the demand-supply equation in the market, which fixes the price today. So, for example during monsoon in Orissa, there was a slight dilution of price. There was a marginal dilution even in the west, but that was totally market driven.

So, at the same time now, when the demand grows at 10 per cent post monsoon again, we will see market-driven prices. But, it will be difficult to predict the price. But surely, it will be higher than what it is today and it is a pure supply-demand situation. It is not something that one can artificially peg or cap.

Have you been able to convince the Government though that this is a market driven phenomenon, and it happens at the selling end rather than at the manufacturing end?

This question would be relevant if any plant is running below capacity. All plants today in the country are running at 100 per cent, so is India Cements. Our production has grown about 5.5-6 per cent over the last year, but that is it.

At the moment, I don't have a gram of cement to sell additionally, so where is the question of it being at the production end? So surely, it is only at the selling end. This has been the situation for the last 12 months.

What is the possibility of imports kicking in at Rs 230-240 plus kind of prices? Generally, cement is not a commodity, which is easily transported in and out of the country. But some people contend that at very high prices, maybe imports have become an alternative. Has it reached a price point now?

We are now talking of a situation, where last year, India had consumed 141 million tonnes of cement, out of which 6 million tonnes of cement was exported. This year, we expect to wind it at about 155 million tonnes, out of which 5-6 million tonnes would be exported.

Now this export takes place substantially from the western coast, where plants can load the vessels directly. We do not have the infrastructure for it. Even if some import does take place near the coast, the quantity that can come is not huge.

One must also remember that in India, almost 95 per cent of the cement or even more is sold in bagged form, which is not easy to transport or handle. Distribution is also needed since cement is branded.