The Indian government and the cement industry appeared to be on a collision course, with the industry department asking manufacturers to cut prices or face a possible ban on exports.
While government, which has taken up the cause of the builders, has termed the increase in cement prices, that have gone up from around Rs 135 a bag in January to Rs 210 a bag now, has termed the price rise in the western and the northern part of the country "abnormal", the industry is attributing the increase to higher input costs.
"They (cement manufacturers) are profiteering. There has been an abnormal increase in cement prices in certain sectors like northern and western regions in the past few months,"commerce and industry minister Kamal Nath said on Tuesday.
The industry department, which had called a meeting of cement companies and builders association to review the situation, has given a week to ten days time to manufacturers to take necessary action for bringing prices to "realistic levels".
Ajay Dua, secretary in the department of industrial policy and promotion, said that as per estimates, cement prices had increased by nearly 40% since November 2005, while input costs had increased by 15%.
"The cement companies have made an additional profit of Rs 1,000 crore between October-March 2005-06, compared with the first two quarters of the last fiscal. We have told them that it’s a free economy but the government may have to step in since cement is a crucial input for infrastructure,"Dua said.
But Cement Manufacturers Association V-P and Jaiprakash Associates MD Manoj Gaur contended that the price rise was on account of increase in input cost of coal, electricity and freight charges. "Unless input costs decrease, we can’t reduce prices,"he said.
Gaur said cement companies were now required to buy more coal in the open market, which was being given by Coal India Ltd through e-auctions, and that e-auction prices were on an average 40% higher than notified prices.