Government companies foil effort to ease cement prices

Indian Cement imports will be slow to rise even though the government has brought down the import duty to nil, due to the insistence of many government-owned companies on domestically supplied cement from select firms.

NTPC recently turned down a request from a construction company to use cement imported from Pakistan since "cement is to be procured from reputed manufacturers like ACC, Cement Corporation of India, L&T, Gujarat Ambuja, Laxmi, Jaypee and Grasim only", even if the imported cement meets the required technical specifications.

The government had recently allowed cement imports at zero duty in a bid to bring down the rapidly rising prices, as long as they meet the standards specified by the Bureau of Indian Standards (BIS). However, the insistence on selected vendors seems to void this move.

Explaining the rationale for sticking to selected vendors, an NTPC official said they encounter lesser problems with tried and tested vendors. "There can be quality problems in a new source ...and that lead to delays," he said.

This insistence on selected vendors is not limited to NTPC. There are other government companies like National Buildings Construction Corporation (NBCC) which have a similar list of limited permitted vendors that completely rules out the imported cement option. It is therefore not surprising that there has hardly been any import of cement in the last few months.

"The main issue here could be the impracticality of import as there is a huge freight component in import. Moreover, if a user industry imports cement, it has to go through the hassles of contracting import, getting customs clearance, handling, unloading and transporting it to the site. The domestic cement companies deliver cement at the site," says Rahul Kumar, chief operating officer of Jaiprakash Associates.

With a significant chunk of cement consumption being driven by government works – like roads, low cost housing and power plants  – the impact of opening of imports on prices will be limited, say industry officials. "This is one of the reasons that cement manufacturers are increasing their prices with such impunity," says the official of a company which is facing delays in supply of the commodity from the list of approved vendors.