Cement shortage tops high prices
The Times of India

Weeks after the Centre tussled with companies to lower prices, a runaway demand is causing acute shortage of the commodity across the country. Despite an average 10% rise in cement prices in the last four months, builders are faced with shortage of cement leading to delay in construction projects. The shortage is also fuelling a cost overrun.

TOI spoke to a cross section of construction companies. All of them, concurred with one point: ‘‘We are willing to pay the price cement companies want, but we should get the quantities that we want. Unfortunately we are not getting it. And a cartel is in play.''

An official at the Consolidated Construction Company (CCCL) said their daily requirement for various projects is 12,000 bags (each bag of 50kg) and total requirement per day across the country was 25,000 bags.

‘‘We get only 60-65% of our requirement. This is not a phenomenon restricted to south or Chennai. This shortage is being felt across the country. Even, during monsoon, (which is typically the period when cement pricexs tend to show weakness), the prices have been high and also stock availability is lower than what is needed,'' the official said.

A Mumbai-based builder says, ‘‘My long standing supplier is no longer willing to get into rate contracts of over two months. The uncertainity in planning building projects has gone up significantly.''

Statistics released by Cement Manufacturers Associations suggest that cement factories in the country are already running full capacity. In north, central and south India, plants were producing more than their rated capacities, leaving no room for additional supply. A surge in demand, unlikely during monsoon months, has caused the sudden short supply. Cement offtake has increased by 9.28% in Jan-July period (over its corresponding figures last year) in north, 7.38% in east, 10.44% in south, 15.71% in west and 6.77% in central India.

To check the runaway prices in cement, the finance minister had proposed a special excise duty in the budget. However, the companyies managed to pass on the excess burden to customers as the demand exceeded supply. The minister had then warned companies to keep prices in check and allowed easier import norms. Subsequently, it was suspected that traders and cement manufacturers engaged in a cartel to control cement production to keep prices high.

‘‘For the past year or so, we we are seeing a demand outburst. Demand is outstripping supply, it is but natural at some point, such a situation will lead to cement shortage, which is what is happening. The demand growth for January to July this year nationally is 10.14%. Where is the need to cartelise? Builders and people are used to a situation where cement was a surplus commodity. When they find it to be a deficit one, they call it cartelisation. The accusation is rubbish,'' India Cements MD Srinivasan said.