Cement-makers pooh-pooh cartelisation, say prices determined by the market

Our Bureau Hyderabad | Updated on January 12, 2018 Published on June 09, 2017


“The industry costs have been much higher than the margins”

Cement prices are determined by market dynamics and should be allowed to be so, according to industry players.

“The industry is bleeding with the return on capital of about 6-8 per cent,’’ Rakesh Singh, Executive President, India Cements Ltd, told newspersons here on Friday.

There have been allegations of cartelisation and ‘unjustified’ prices in Andhra Pradesh and Telangana from the builders after a steep hike in prices in the two markets recently.

Price hikes have to be factored in the context of price volatility, escalating costs and low capacity utilisation,’’ he said adding: “The industry costs have been much higher than the margins’’.

Capacity utilisation levels in the South are only 60 per cent and this will increase overheads for the cement manufacturers.

On the recent government move asking cement makers to cut price in Andhra Pradesh and Telangana, Singh said: “The cement industry is not getting any help from the Government. It should leave us alone and let the price be decided in a perfectly competitive market.’’

The industry has ‘no level playing field’ and protection as imports from Pakistan are being allowed freely, he added.

Sreekanth Reddy, Executive Director, Sagar Cements, said the best days for cement makers ended in the Southern markets in general after 2009. “We are seeing some uptake in demand in Andhra Pradesh and Telangana for the last two years and this has to be sustained.’’ he said adding that elevated prices do not always end in higher returns for the cement firms. According to M Ravinder Reddy, Director Marketing, Bharathi Cements, cement makers have ‘little’’ control over price as other components of price such as fuel costs and taxes are not decided by them.

The outlook for demand in the next two years is encouraging. The industry is expecting the demand to grow at 5-7 per cent in the Southern markets, led by a double-digit growth in Telangana and Andhra Pradesh.

Published on June 09, 2017
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