Cement firms blink, drop prices for govt

Three days after being warned by Commerce and Industry Minister Kamal Nath to rein in prices or face the consequences, cement manufacturers today said they would cut prices by five per cent on all supplies to government projects and undertakings with immediate effect.

Faced with the threat of action, including a ban on exports, the cement makers told the government today that they would ensure adequate supplies to retailers in order to prevent any possible shortage and price increases. The companies will also monitor supplies to retailers to ensure that there is no profiteering.

Representatives of the Cement Manufacturers' Association, who met industry ministry officials, also said they would make new investments to enhance production capacity by 30-35 million tonnes over the next few years.

Nath, who had, last Friday, given cement manufacturers three days to act, said, "These measures are adequate in stemming the price increase, but we will continue to monitor the situation."

The minister added that the price cut on supplies made to the government would include supplies to central power, roads and highway projects.

The manufacturers are hopeful that the proposed increase in production and improvement in distribution will not allow the prices to spiral significantly.

"The industry made it clear in its representation that there was no cartelisation behind the recent price rise. Price changes are determined by market forces and there can be no guarantee that even if manufacturers avoid increasing the prices, the market will sell cement at lower rates," said a CMA member.

The government had convened a meeting of the cement manufacturers as prices had been increased by Rs 41 a bag against a logical increase of about Rs 16 a bag taking all input cost increases into account.

While there had been an increase of Rs 41 in the average price per bag since December 2005, the increase in Mumbai had been Rs 71, in Pune Rs 63, in Goa Rs 79, in Lucknow Rs 48 and in Delhi Rs 45.

The share prices today of the biggest cement companies fell more than the drop in market index S&P CNX Nifty. Gujarat Ambuja Cement's share price closed at Rs 101.15, down by 4.40 per cent, while Grasim's price dipped by 5.62 per cent to Rs 2,125.30.

ACC's share price closed Rs 862.85, down by 3.86 per cent. The share price of India Cements ended the day at Rs 193.60, a slide of 5.54 per cent.