Companies

Competition panel orders fresh probe into cartelisation in cement industry

Suresh P Iyengar Mumbai | Updated on December 10, 2020

The Competition Commission of India has ordered a fresh investigation into cartelisation in the cement industry, even as the penalty of Rs 6,300 crore levied on 11 cement companies has been pending in the Supreme Court since 2018.

On Thursday, LafargeHolcim group companies, ACC and Ambuja Cement, said the Competition Commission of India has initiated an investigation against cement companies in India, including ACC, regarding alleged anti-competitive behaviour.

ACC and Ambuja Cement are of the firm view that they continue to act in compliance with competition laws and are fully cooperating with the investigation and providing all necessary information to the authorities. Both companies said they have a long-standing commitment to fair competition as reflected in their Code of Business Conduct, they said in a separate statements.

Despite weak demand, cement companies have posted healthy growth in net profit on the back of lower cost of operations. Though sales of 41 top cement companies fell by 12 per cent in the first half of this fiscal, their net profit was up five per cent on the back of a 15 per cent dip in total expenditure.

The operating margin of these companies was up 26 per cent in the first half of this fiscal, while the net profit margin increased to nine per cent, according to research by Care Rating.

Cement production is expected to fall sharply by 17 per cent this fiscal, while capacity utilisation may range between 45-50 per cent. This will be the sharpest ever fall in production (and capacity utilisation) that the industry has witnessed, it said.

 

Back in 2016, the Competition Commission, on a complaint filed by the Builders’ Association of India, had found that 11 cement companies had indulged in price cartelisation, and levied a fine of Rs 6,300 crore on them, including UltraTech Cement (₹1,175 crore), ACC (₹1,148 crore), Ambuja Cement (₹1,163 crore), Ramco Cements (₹259 crore) and JK Cement (₹129 crore), and the industry body Cement Manufacturers’ Association.

Cement companies challenged the penalty at the Competition Appellate Tribunal and it was stayed with a direction to deposit 10 per cent of the penalty within a month of the order.

In 2018, the National Company Law Appellate Tribunal (earlier Competition Appellate Tribunal) dismissed the cement makers’ plea.

Following this, the cement companies in October 2018 moved the Supreme Court, which stayed the penalty and directed the cement companies to deposit 10 per cent of the penalty.

 

Published on December 10, 2020

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