Cement firms criticise TN govt's threat

Cement manufacturers have criticised the Tamil Nadu government's threat to take over cement units in the state if prices do not come down in the near future.

Top officials of the cement companies speaking to Business Standard, said the state government's intention to nationalise the cement companies on the allegation that they were keeping the prices at a higher level through cartelisation of the commodity was "unfortunate and meaningless".

A statement, which was issued after a high-level meeting under the chairmanship of the Chief Minister M Karunanidhi, yesterday said, "If private cement companies do not come forward to reduce the prices, the government will be left with no option but to take over the cement factories in the state in public interest." The statement also said that the government would import 100,000 tonnes of cement through MMTC to tide over the shortage of the commodity.

The official statement of the state government has come at a time when the prices in the country had stabilised for over four months, industry players said. In the southern region, the retail prices are hovering around Rs 240-250 a bag (of 50 kg). The government intended to sell imported cement at Rs 160 a bag.

The chief executive officer of a south-based cement firm said that the sudden announcement from the government was "surprising", but the industry chose not to react to the government move. "We are keeping quiet on the issue for the time being", said owner of a company having production unit in the state.

According to the deputy managing director of a north-based cement firm, the basic premises of the threat to take over cement units was unacceptable in a democracy.

"Especially at a time when there is no cartelisation and prices are being fixed by the demand and supply factors, state government's recent statement is discouraging," he added.

It is the first time that any state government has intervened in the cement industry. The actions of the central government last year in order to rein in the galloping cement rates had almost put brakes on further hike since April 2007, with prices hovering around Rs 240 a bag. Experts tracking cement industry said that it was not possible to take over units and nationalise them. The government's statement is just an arm-twisting ploy to bring down prices as a part of its populist measures.

Mumbai-based analysts said that import of 100,000 tonnes of cement in a short time seems to be unrealistic due to lack of logistical infrastructure coupled with the recent turmoil in Pakistan (the main cement exporter to India).

Tamil Nadu is expected to add around 8-10 million tonnes of fresh capacities this year. The state, which currently has a capacity of over 17 million tonnes per annum, houses units of ACC, Indian Cements, Madras Cements, Chettinad Cement, Dalmia Cements, UltraTech and Tamil Nadu Cements.

The companies whose plants are coming up this year include Chettinad, Dalmia and Madras Cements. Market sources said that once the capacities in the pipeline go onstream, prices might see a cut of 20-30 per cent in the region.