Cement prices in Andhra at a new high

Cement prices in Andhra at a new high
Published: 28 February 2006

Cement prices in Andhra Pradesh are at a new high with the onset of summer, which usually sees hectic construction activity in the state.
According to market sources, the average retail price is now in the range of Rs 145-148 per bag in Hyderabad, Rs 143-145 in Vijayawada, Rs 154-156 in Chittoor and Rs 160-165 in Srikakulam and Visakhapatnam. The difference in the prices in these regions is mainly due to their proximity or otherwise to the cement units.
While the average cement price during the entire year hovers around Rs 115 per bag in the state, it normally goes up to around Rs 135 during the peak construction season, ie, summer. Compared to the last summer, the current retail prices show an average increase of Rs 10 to Rs 15 a bag across the board.
Ramesh Chandro, managing director of Ckoramaandel Cements Limited, attributes the increasing prices of cement to the construction boom in the state which has resulted in increased consumption of cement.
“The real estate activity in Hyderabad, Vijayawada and Visakhapatnam is already very high. Once the state government’s construction activity on the irrigation and housing fronts takes off, the demand for cement would further go up resulting in firming up of cement prices in the coming days as well,” he told Business Standard. He said the current increase in cement prices was due to increased demand within and outside the state.
However, this view is not endorsed by all. According to big players in the real estate sector, Andhra Pradesh would stand to lose if the current trend continues.
R Ravinder Reddy, chairman and managing director of Hyderabad-based housing construction major, Janapriya Engineers Syndicate Limited, said: “We can understand the normal fluctuation of cement prices between summer and off-season periods. But the current trend, which also has an element of artificiality, is not good for states like Andhra Pradesh for they have been betting big on infrastructure development.”
While stating that the overall demand-supply position or the market forces determining prices of any inputs need to be accepted, he said that the increase in cement prices in the state was being witnessed partly due to the control and monitoring of supplies by cement companies.
According to D V Naidu, managing director of Srinivasa Constructions Limited, which executes irrigation projects, prices beyond Rs 140 per bag may escalate the cost of ongoing irrigation projects.
“In most of the EPC (engineering procurement construction) contracts of irrigation projects awarded by the Andhra Pradesh government, cement prices were quoted at Rs 125 per bag with a 5 per cent absorption on the higher side. This means the contractor himself will bear the initial cost escalation of up to Rs 140 a bag. If the prices go beyond the 5 per cent limit, the government will have to bear the additional cost as per the cost escalation clause under the agreement,” he told Business Standard.