With Indian cement prices showing no signs of coming down in the immediate future, bulk consumers in the state, including irrigation contractors, builders and departments like housing, have pressed the panic button. Now the government is under pressure to step in to ensure price stability.
While state government officials have already been asked to look into the complaints of non-availability of cement in several parts of the state and the alleged cartelisation by manufacturers, chief minister Y S Rajasekhara Reddy is himself expected to bring local cement manufactures across the table to discuss the demand-supply problems and the issue of prices with them.
More than anyone else, the government itself is concerned over the implications of rising cement prices on the cost of irrigation projects and also on its other pet programmes like housing. It has made a commitment to build a whopping 15 lakh houses for weaker sections during this year alone.
Cement prices in the state have already spiraled to around Rs 155 a bag across the state from Rs 120 a bag prevailed just before the onset of the present construction season. But more than the current price levels, the future scenario is very grim forcing the government to find a quick way out.
The prices are expected to touch Rs 160 per bag in Hyderabad and other places in the state in next few days as the companies are reported to have decided to increase the wholesale price after receiving the feedback that the retailers were already selling cement at a premium.
Solely attributing the rise in cement prices to increased demand for cement across the country, local manufacturers forecast the prices to touch Rs 200 a bag by the end of April, 2006, in Andhra Pradesh. Acknowledging the concerns of consumers, including his department officials, over the shooting cement prices, minister for major irrigation Ponnala Laxmaiah told Business Standard that the chief minister was contemplating holding a meeting with manufacturers before the end of the ongoing Assembly session.
According to industry sources, the entire South except Tamil Nadu has been hit hard by the price rise. It appears a matter of time before prices in Bangalore reach Rs 200 a bag from the present Rs 185 a bag, according to them.
The spiraling price has forced bulk consumers to approach the manufacturers directly and book orders for large-scale supply. According to them, the share of dealers in the total sales has come down to around 40-50 per cent from around 70 per cent a few months ago.
Of the monthly production capacity of 2Mt in the state, about 1.3 to 1.4Mt of cement is estimated to be consumed locally as compared to the average monthly consumption of 700,000-800,000t until last year.
Though buoyed by the price rise in the local market, Andhra cement companies are not willing to cut exports drastically as they are finding the prices outside the state also equally attractive even after adding transportation costs.
In a double whammy for the local consumers, the supplies from companies outside the state such as ACC and Ambuja have also reportedly came down during February owing to the growing demand in those states where they have manufacturing bases, industry sources told Business Standard.