Cement firms break word, increase prices

Low inflation, sustained demand even during rains trigger move.

Within four months of giving a commitment to the government that it will hold prices for a year, the cement industry today hiked prices by Rs 3-5 per 50 kg bag, an increase of 1.3-2 per cent.

"All cement companies have hiked prices by Rs 3-5 in Maharashtra and southern India from today, taking the price per 50 kg bag to Rs 270 in Maharashtra and Rs 250 in the South. The rains have not affected demand as of now and no price cut is expected this monsoon," said Sanjay Ladiwala, the president of the Mumbai Cement Stockists and Dealers Association.

This is in contrast to the previous monsoons when the companies reduced prices due to a dip in demand.

The cement industry had promised Commerce Minister Kamal Nath in March that it would not hike prices for one year even if there was an increase in the cost of inputs.

"We have hiked prices by Rs 3-5 to Rs 232-235 per 50 kg bag in tune with the rising demand and owing to an increase in the manpower cost. There is no oversupply and the demand is still buoyant," said AK Saraogi, chief financial officer, JK Cement, a leading manufacturer of North India.

Though Shree Cement and Jaiprakash Associates have denied any price increase, industry watchers expect them to follow suit shortly.

The steep decline in inflation from 6.7 per cent to just above 4 per cent has also encouraged the industry. Cement carries 1.73 per cent weight in the wholesale price index (WPI) and the government has taken a number of steps to keep its prices under check.

In January, it abolished the 12.5 per cent Customs duty on cement and in May, rolled back the dual excise duty and introduced an ad-valorem duty, which induced a price cut of Rs 3-7 per bag. In April, it withdrew the countervailing duty (CVD) on the product.

Most cement stocks were up today. At the Bombay Stock Exchange, ACC gained 8.98 per cent to close at Rs 1,022.55, JK Lakshmi Cement gained 4.64 per cent to close at Rs 133, Shree Cement gained 4.57 per cent to close at Rs 1,350 while India Cements gained 3.56 per cent to close at Rs 215.10.