Cement cos cry foul over cartelisation tag

Hyderabad: Representatives from various cement companies on Friday denied that they formed a cartel to artificially jack up prices, saying market dynamics decide the prices, not the companies.

“We are being unfairly targeted for no fault of ours. The allegations of cartelisation are totally untrue. The fact that cement prices have not gone up by more than one per cent annually in the past five years goes to prove that there is no cartel.

At the same time, real estate prices have gone up by 10 per cent a year,” S Sreekanth Reddy, Executive Director, Sagar Cements Limited, told the media here.

The industry representatives comprising - apart from Sreekanth Reddy - M Ravinder Reddy, Director-Marketing, Bharathi Cement, and Rakesh Singh, Executive President, The India Cements, also rued frequent interference in the industry from various quarters.

“Nobody bothers if there is an increase in the prices of steel or other commodities. But, we’re being called for meetings whenever there are price fluctuations which are primarily due to market dynamics and competition.

It is better we are left alone and let the market forces prevail,” Rakesh Singh pointed out, explaining that the cost of cement in real estate sector was not more than Rs 150-175 per sft. “Someone needs to tell us what adds up another Rs 4,000 to Rs 5,000 per sft to build a flat,” he said.

The cement industry plagued by overcapacity in South India now sees better growth prospects. “We expect 10-15 per cent growth in demand in Andhra Pradesh and Telangana over the next two years as the governments in both the Telugu states have taken up a large number of infrastructure projects including affordable housing schemes,” Ravinder Reddy said.

“Key demand drivers for the industry are individual house builders and government initiatives. Some of the initiatives taken by both Telugu states have positively impacted growth scenario,” he said.

According to him, the industry in South India in general and AP & TS in particular is facing a huge capacity overhang with an installed base of around 150 million tonnes and a demand of only around 60 million tonnes in South India and an additional 20 million tonnes going to neighboring markets like eastern and western India.

“Industry is highly fragmented with over 50 brands with huge divergent capacities fighting for market space. Unfortunately, for the last five to six years, South Indian cement demand has been de-growing. Capacity utilisation is sub-60 per cent and there has been high volatility in the pricing,” he said.