Cement makers agree to 1-year price freeze

After an eight-day stand-off with the government, cement manufacturers today agreed to hold the current price line for the next one year, though refusing to roll back the recent hike.

They also promised that they would pass on the benefits to consumers in the event of the government providing any concessions to the industry.

Speaking to reporters after a meeting with cement industry representatives, Commerce Minister Kamal Nath said, "Cement producers have agreed to hold the price line and not increase prices any further for the next one year, even if their input costs increase." 

CONDENSED Price movement of cement stocks (In Rs)
	8-Mar	9-Mar	Change
Shree Cement	1140.90	1026.9	-9.99%
Birla Corpn	229.75	207.55	-9.66%
India Cements	166.90	153.25	-8.18%
OCL India	154.00	143.85	-6.59%
ACC	833.35	780.85	-6.30%

However, the companies did not agree to the government's demand for a rollback of the price hike, effected following the imposition of a dual excise duty structure.

The Budget has reduced excise duty on cement from Rs 400 per tonne to Rs 350 per tonne for a cement brand sold at not more than Rs 190 per 50 kg bag. Cement selling at prices above this level will attract a duty of Rs 600 per tonne, about 71 per cent higher than for those selling at or below Rs 190.

"Post-Budget, companies had raised prices by Rs 10-12 a 50 kg bag. It has been decided that companies will absorb any increase on the input side and refrain from a price hike for another one year. We expect the input cost to go up by about 6 per cent over the next one year and it will impact our bottom line marginally," said H M Bangur, chairman and managing director of Shree Cements.

The decision to freeze prices for the next one year had an immediate impact on cement stocks. Most stocks fell by an average 5-7 per cent.

"If any concession is given by way of excise duty or other statutory levies, the companies would pass on the benefit entirely to consumers," Manoj Gaur, executive chairman, Jaiprakash Associates, told reporters. Gaur is the president of the Cement Manufacturers' Association of India.

Cement industry representatives also drew the government's attention to the higher price of coal in the open market. They also mentioned that a sustainable way of controlling prices is to increase supplies faster than demand, which is growing at 10 per cent annually.

"The industry has taken measures to expand installed capacity by almost 100 million tonnes over the next three years by incurring an expenditure of over Rs 40,000 crore, thereby taking the total capacity to 250 million tonnes," Bangur said. He added that the industry is open to further talks with the finance minister.