Going against instructions from the commerce ministry to reduce cement prices, companies in the south have actually hiked prices, saying that prices will always remain a function of the demand and supply dynamics. All those stern warnings of Commerce Minister Kamal Nath to cement companies haven’t fazed those companies one bit.
Cement prices in Tamil Nadu and Kerala will increase by Rs 5/bag on May 19, while a second hike by Rs 5/bag will come into effect on June 1. "Cement prices are a function of demand and supply, prices are not regulated, but depends on demand on almost a daily or weekly basis and how supplies matches up with the demand," said Sanjay Ladiwala, president, Cement Stockists and Dealers Association.
The proposed hike in the South, they say, is purely due to the sharp rise in cement demand, which has gone up 26 per cent year-on-year, thanks to infrastructure spending. Cement companies are not worried about the five per cent discount that they have to now offer to government departments. They say the total sale to government departments won’t be more than two per cent of the industry sales. And price increases will make sure that the discount blow is softened
It has been quite a climbdown for Commerce minister Kamal Nath, who was insisting last week that cement companies are profiteering and that they need to bring down prices by 30-35 per cent.
But companies have argued that prices will continue to be a demand-supply phenomenon and the latest move very clearly suggests that they wont let the government have the final say on prices.