Competition panel to probe price cartel in cement, India

Competition panel to probe price cartel in cement, India
Published: 13 September 2010

The Competition Commission of India is set to investigate increase in prices of cement by the manufacturers and is also looking into whether a cartel is at work in determining the prices.

In a recent letter to the companies, the office of the Director General in the Commission has said that it has been asked to investigate the alleged increase in cement prices and has sought a whole lot of information from the cement companies.

According to reliable industry sources, the Director-General has said that cement prices have been increased in the last few years without any corresponding increase in either input costs or State levies, indicating that a cartel is at work.

The letter has asked the companies to furnish details such as their installed capacity including production plants in various States, total production in the last three years, the markets in which the companies sell their cement, cement price on January 1, 2005 and the dates on which they had been revised from 2005 to June 2010 with the reasons for the increase and how the companies fix the price of cement.

In the past, the Monopolies and Restrictive Trade Practices Commission has conducted similar investigations against the cement industry on charges of cartelisation, but nothing much came of them. However, the industry sources say that the Competition Commission has more powers than the MRTPC and hence the Commission’s letter cannot be easily dismissed.

The manufacturers have dismissed these charges and say that there has been a huge increase in input costs, especially that of coal, gypsum and power, as also royalty on limestone. Railway freight charges too have been increased while the Centre has tinkered with excise duty.

The Competition Commission’s probe comes at a time when cement manufacturers, especially in the South, are grappling with falling cement prices and continued poor demand in the region. In some parts of Andhra Pradesh, which accounts for a bulk of the manufacturing capacity in the South and is also the biggest market, cement prices are sold below manufacturing and distribution costs, according to the sources.