Builders look to import cement as local cartel jacks up prices by 60%
24 Apr 2017
With the cement cartel jacking up prices by Rs140 (or 60 per cent) from Rs240 to Rs380 per bag of 50 kg, jeopardising the government's agreement with builders' association to build affordable homes for the poor, builders are now looking at sourcing cement from countries like Iran and Korea, say reports.
The steep hike in cement prices threaten to derail Prime Minister Narendra Modi's 'Housing for All' plan as home buyers in the 'affordable' segment may face a hurdle at the time of delivery with developers seeking higher prices in view of the steep hike in cement prices.
After the hike in the price of a 60kg bag of cement from Rs240 to Rs300 in the past two weeks, cement companies have now raised prices further to Rs350-380 per bag as builders rush to buy cement before rains set in in June.
In Bengal, the hike in the price of a 50kg bag of cement from Rs250 to Rs300 in the past two months, have led to fears that the cement companies are scheming to hike prices further to Rs350 per bag before June, when there is a rush to buy before the rains set in.
If that happens, it will raise construction costs by Rs50 per sq ft, a substantial amount in an affordable housing project where margins are low.
The Confederation of Real Estate Developers' Associations of India (CREDAI), the apex body of builders, is mulling either approaching the Competition Commission of India (CCI) or import cement from Iran, Korea or other countries, if the sudden unjustified steep hike in cement prices does not come down.
In fact, the cost of imported cement works out to Rs230-240 per bag, which is relatively cheaper than domestic sourcing.
CREDAI alleged that cement manufacturers have artificially raised prices by more than 60 per cent in Telangana and Andhra Pradesh thus pushing the prices anywhere from Rs240-380 per bag in the last one week.
CREDAI has asked the state governments' intervention to check the unrealistic increase in cement prices. ''Cement prices in both states have witnessed a sudden jump of 60-70 per cent in the last one week.
Reports quoting S Ram Reddy, president CREDAI-Hyderabad, said the association is thinking of various options, including approaching CCI, demanding the setting up of a cement regulatory body besides looking at imports as well.
Meanwhile, the Supreme Court will be hearing a case on cement cartelisation on 2 May.
It may be noted that between Andhra Pradesh and Telangana there are over 20 cement manufacturers, who account for about 26 per cent of the total installed cement capacity of the country.
As the housing sector accounts for a significant consumption of the total cement demand in India, the unilateral move by manufacturers will hurt home buyers most.
Meanwhile, shares of almost all big, medium and small-sized cement companies are having a great spell in positive territory today.
Despite a drop in earnings, UltraTech Cement and ACC are up sharply, with investors lapping up these stocks, betting on hopes cement sales will pick up momentum as the government is expected to speed up infrastructure projects.
