Cement cos gear up for price hike in AP

Cement prices in the state have hovered around Rs 145 a bag in the Hyderabad market since January. Cement prices plunged to a three-year-low of around Rs 85 per bag in August last year and the industry went whole hog to squeeze supplies by observing despatch holidays for a week every month till prices stabilised at Rs 165 in December.

January 2004 saw the prices climb down to Rs 145 a bag in the Hyderabad market which alone consumes around 1.75 lakh tonnes a month.

The industry expects the demand to go up significantly in the near future. With Lok Sabha and state elections on the anvil, the state government is hastening the pace of all pending infrastructure projects within the next two months. Cement companies expect the government segment alone would consume over 40 per cent of the annual despatches in the state.

The recent spurt in development works saw cement despatches touch 8.5 lakh tonnes in January as against the targeted 7.5 lakh tonnes.The corresponding despatch figures for the January 2002 was 7.88 lakh tonnes.

December 2003 accounted for around 7.8 lakh tonnes. Hence the optimism on the price hike front, the sources explained, apart from the booming housing activity in the state and certain road projects which are ready to take off.

Efforts are also on to prevent any single manufacturer from reneging on agreed controls on cement despatches.

In this regard, it is pertinent to take note of the failure of a new order-based mechanism put in place recently by the industry. In the envisaged system, delivery was only on receipt of orders from the dealers with payment.

Though it triggered great hopes in the initial days of December, the mechanism had virtually been without any takers, the sources informed, adding the time-tested despatch regulatory practice would be back in vogue.

Denying allegations of cartelisation, cement manufacturers continue to maintain that they have no other option but to keep price at around the Rs 160-165 level, if they were not to slip into the red.

They even stressed the relevance of a Crisil study which observed that for viable operations by any cement unit in the state, the price needed to be pegged around Rs 175.