Hope makes cement costly

Hyderabad/Ongole: Cement companies have increased prices by 40 per cent on the back of stable and growth-focused governments at the Centre and state, throwing construction plans of builders and ordinary citizens in quandary. The price of each cement bag about a week back was in the range of Rs 222 to Rs 250. But the cement companies have increased the price by Rs 80 to Rs 100 in the expectation of a big jump in demand due to construction activity to be undertaken at the soon-to-be-decided capital of Andhra Pradesh and construction projects planned by the Telangana government.

Defending the price hike, Nagarjuna Cements Limited managing director K. Ravi said, “If the cement industry has to survive, the prices must go up. Before the slowdown, the cement production capacity in united Andhra Pradesh had been added phenomenally. But post-2008, our plants are running at 40-50 per cent of the installed capacity.” According to Piyush Jain, equity and research analyst at Mumbai-based Morningstar India, cement prices had gone up across India in the past one year but they were subdued in Andhra and Telangana because construction activity was down due to the political unrest and uncertainty.

“Now that the situation has settled down after the elections, prices are correcting and coming in line with the rest of the country. For instance if the price of a cement bag was Rs 310-325 across India, it was Rs 200 in Andhra Pradesh and Telangana. So we are now seeing a correction in the prices.” Builders and individuals, who were planning to construct their houses, would feel the pinch of the price hike as cement makes up a big chunk of construction cost. “There is no reason to hike the price like this. Though the cement price was low in the state, there is no change in the demand scenario that warrants a price hike. In fact, in the rainy season, the construction activity slows down across India,” said C. Shekhar Reddy, national president of Credai.

Industry experts, however, suspect “cartel” behind the price hike. “The Central government’s plan to give a big push to the infrastructure sector and the construction activity expected to be undertaken by the Telangana and the Andhra Pradesh governments have led to the price hike.” An Ongole-based cement dealer M. Srinivas Reddy justified the price hike saying that the price of a cement bag was Rs 350 in 2009. But it was gradually decreased to below Rs 200, though the price in Tamil Nadu and Karnataka was Rs 320. With this price hike, he said the cement companies have brought prices to the industry average and expects further rise going forward.