Govt intervention brings wholesale prices below Rs 200

Ambarish Mukherjee

Checking the rise

Strong interventions

by the Government at the Central and State levels

The Minister

for Commerce and Industry, Mr Kamal Nath, meets producers on May 12

The State

Governments too had asked cement companies to check prices

New Delhi, May 31

The sharp rising trend in cement prices in the last few months seems to have been arrested with prices stabilising over the past two weeks and in some cases coming down by Rs 5-15 per 50 kg bag. The development follows phased intervention by the Government during this month to rein in the manufacturers.

Cement prices had increased from around Rs 135-140 to Rs 205-210 per 50 kg bag between December 2005 and May 2006 in the wholesale market and the ruling retail price moved up to Rs 235-240 per bag.

Industry sources said as of now the wholesale price has come down to below Rs 200 and retail prices are in the range of Rs 215-230, depending on the location.

According to a Delhi-based senior architect who heads a construction company, "the last lot we bought was at below Rs 200 per bag but this hardly matters. Compared to the increase of Rs 65-70 since December from Rs 135-140, this is hardly any reduction."

According to the Secretary-General of the Cement Manufacturers Association (CMA), Mr E.N. Murthy, the prices have moved down by Rs 4-5 per bag. "Prices have come down in most centres and it is the market forces that is bringing them down,'' he said.

There had been strong interventions by the Government at the Central and State levels to control cement price hike. At the Central level the manufacturers were told on May 2 to take steps to curb prices. In the absence of any major action by the manufacturers, the Minister for Commerce and Industry, Mr Kamal Nath, had a meeting with the producers on May 12.

On May 15, cement producers assured the Ministry of a 5 per cent discount for Central Government supplies but made no reference to open market wholesale and retail prices.

State level measures

The State Governments too had asked cement companies to check prices and the Chhattisgarh Government went to the extent of telling State-based manufacturers such as Lafarge India and Grasim Cement to immediately scale down prices, failing which it would stop supporting their proposed expansion plans. The State has reportedly put off indefinitely the signing of a memorandum of understanding scheduled for last week with Lafarge India which wanted to invest Rs 700 crore to raise the capacity of its Chhattisgarh unit from 1.5 million tonnes per annum (mtpa) to 3.5 mtpa. Industry sources also pointed out that apart from Government considerations, the cement manufacturers also came under pressure on the demand side also with several large consumers like Larsen & Toubro (L&T) scouting the foreign market for sourcing cement despite a prohibitive 15 per cent duty.

(This article was published in the Business Line print edition dated June 1, 2006)
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