Case for Indian Competition Commission

Case for Indian Competition Commission
Published: 13 December 2005

The government’s belated concern over cartelisation in cement is welcome. It should fast-track the Competition Commission, currently awaiting fresh legislation. Cartelisation among cement majors is not new. Indeed, in many other commodities, too, it is fairly common to see simultaneous price hikes, even from avid competitors (reports The Economic Times).
 
In the past, price arrangements among cement companies did not last long because of extreme fragmentation and large surplus capacity. Any concerted attempt to push prices up was undone quickly by rank-breakers who dumped large quantities to take advantage of the engineered prices. Today’s cement industry lends itself far more easily to cartelisation. Surplus capacity has almost disappeared while market consolidation has given the larger players greater pricing power. Against 32.6 per cent in FY98, the top five cement players (ACC, UltraTech, Grasim, Gujarat Ambuja, and India Cements) now account for nearly 50 per cent of the total cement capacity. For all practical purpose, the top five are just three players: Grasim owns 47 per cent of UltraTech and ACC-Gujarat Ambuja have a strategic relationship. This dominance makes it easier to influence prices. 
 
Checking cartels is important because they impinge on the country’s competitiveness, the more so when the ramped up good happens to be an input for basic infrastructure. They also act against innovation. Checking price arrangements, however, is not an easy task. 
 
That is why many countries have set up and housed expertise in separate bodies to unearth and prove cartelisation. After experimenting with a toothless Monopolies and Restrictive Trade Practices Commission (MRTPC), India, too, enacted the Competition Act 2002 in early 2003, only to find it entangled in a turf battle with the judiciary. It’s high time fresh law was enacted to get the country’s competition act together.