New cement association on the anvil

New cement association on the anvil

Cement and Steel producers are once again under the ire of government as union minister Nitin Gadkari indicated a brewing cartel in the two industries. Union Minister for Road Transport and Highways Nitin Gadkari has assured the Builders’ Association of India (BAI) that he would look into their demand for a regulatory authority for the cement and steel sectors. He said the Central government is serious about curbing instances of cartelisation.

Expressing concern, Gadkari said he felt there is cartelisation in these industries. The minister made the comments while virtually interacting with the members and office-bearers of the BAI in the month of January 2021.

“We have taken serious note of it [cartelisation] and I have discussed this with the Prime Minister. Most steel companies own iron ore mines and with no increase in labour and power charges, why should there be an increase in steel prices? It is very difficult to understand,” the minister said.

Big players in the steel and cement industry are conspiring together to jack up prices, he said. The steel prices have risen by 55 per cent in the last six months, even though the cost of key inputs like raw materials and power remained the same.

"It will be difficult to achieve Prime Minister Modi’s dream of making India a $5 trillion economy if the steel and cement prices keep rising," Gadkari had said. Cartel is a collection of companies in the same industry that collude together to control the price of a product/service.

This comes a month after the Competition Commission of India (CCI) conducted searches in the offices of major cement producers to find the evidence of price collusion.

Background

In 2019, country's anti-trust body started examining complaints of cartelisation in the cement industry. Following this, in December 2020, it raided top five cement companies, including UltraTech Cement offices and two subsidiaries of LafargeHolcim, world’s largest cement maker.

It conducted the searches simultaneously in multiple offices across the country and seized electronic and physical data, pieces of equipment and material. The agency had also hired private IT experts to decode the data it collected from the seize.

By December 2020, the industry had hiked cement prices by 23 percent, whereas steel prices rose by whooping 45 percent since January 2020. In January 2020, the price of one cement bag (50 kg) was Rs 349, in December 2020, real estate developers were buying the same bag at Rs 430.

On the other hand, during the same period, the price of steel surged from Rs 40,000 to Rs 58,000. Gadkari had made similar comments then too, saying these two industries keep taking unfair advantage of government's initiatives to help them. He had said, "I decided to make all roads concrete. I wanted to encourage the cement industry. But they are only taking (unfair) advantage of the situation and making cartels. So, I am now allowing bitumen for road construction.”

A month after the investigation, Gadkari has brought the matter into the limelight once again. Cement and steel factories exploit people by levying higher rates while there is no noticeable hike in either power or labor costs. This is a clear indication of a cartel in both the industries, union minister Nitin Gadkari said. All the players in the industry have their own iron ore mines and do not have to face any hikes in labour or power rates, he added.

Speaking to the Builders Association of India of Western Region, he wondered why the industry is hiking prices when prices of other input factors have been constant. He indicated government has infra projects worth more than Rs 100 crore in the pipeline and their sustenance would be difficult if both the industries keep this up.

To deal with the situation, the government is mulling over setting a regulator for cement and steel industry. Earlier, Gadkari had written to the PM seeking his intervention on price collusion in the two industries.

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