Cement prices up due to demand, not cartel

Cement prices up due to demand, not cartel
Published: 22 May 2006

The Indian cement industry is in the midst of an unwanted controversy. With the prices rising, Commerce Minister Kamal Nath had accused the industry of forming a cartel. Nath asked the industry to cut prices and even threatened to ban exports which led to a sell-off in cement stocks on the stock markets. Anil Singhvi, managing director of Gujarat Ambuja Cements, spoke to The Indian Express about various issues facing the industry. The commerce minister has threatened to ban exports. Will it hurt companies like yours? In this era when we are talking about free market and negotiating trade deals in the World Trade Organisation to bring down trade barriers it does not make sense to ban cement exports. Prices are rising across all industry-be it steel, real estate or other commodities. I don’t think the industry would like to see exports being banned and the Cement Manufacturers Association has made representation to the government on this issue. 
I do not foresee any ban on exports. The price rise in cement is far lower than the real estate prices which has gone up by four times in the recent months. Why are cement prices shooting up?

How do you see demand in the coming months? It’s plain economics. Cement prices are going up as there is a good demand for the products. In the last one year, cement demand has gone up by 11 per cent and in the coming months it will go up by another 8-9 per cent. We do not expect any let-up in demand during monsoon season when the demand usually falls. All regions barring the East India are doing well in cement consumption. We are currently in the stable prices period. Nobody likes the yo-yo in prices and even we are for stable prices.

Gujarat Ambuja has been taken over by Holcim. Did you find any change in management culture between the Indian and Swiss promoters? No. The Indian promoters had given full independence to the professional managers to run the company and now the new promoters also believe in a professional-run company.

Do you think the consolidation in the cement industry will continue in the coming years? The industry will continue to consolidate in the country. At present there are about 35-40 cement companies and the competition will always be healthy. The number of companies in India are as good as any developed market.

The government is now planning to have a quota for backward classes in private sector jobs. How’re your company’s new owners reacting to this? The only criteria to select a person for job should always be merit. When the government talks about quota, obviously it will not go down with foreign investors as hiring non-meritorious candidates will reduce our competitiveness.