Cement makers cut prices despite rising input costs

NEW DELHI: In what would come as a relief to the government engaged in fighting inflation, cement prices have started falling. Significantly, this has come at a time of the year when demand usually peaks and leads to a price hike. Cement makers are reducing prices despite increase in input costs, mainly due to higher supply on account of new installed capacities and the government���s ban on export.

Shree Cement has reduced the prices of cement by Rs 2-8 in different markets, with maximum reduction of Rs 5-8 in Gujarat. Incidentally, Gujarat is a state where the government���s ban on export is likely to hurt the cement makers most because of the large additional supply it will bring into the market.

Shree Cement MD HM Bangur offered no explanation for the price reduction, which has happened despite an increase in the input cost of Rs 16 per 50 kg bag in a year���s time. Industry sources, however, said Shree Cement���s decision to cut prices was prompted by its urge to retain its market share given the increase in overall supply.

While Shree Cement has reduced prices, others like India���s largest cement maker ACC has decided to freeze its prices for the quarter. ���Responding to concerns expressed by the government, ACC, as a leading cement producer in the country, has decided to hold its cement prices over the coming 2-3 months,��� ACC MD Sumit Banerjee said in a statement. The price freeze will erode the company���s margins, he added. ACC���s input cost have risen by over 12% in the Jan-March period over the previous quarter.Cement makers had paid little heed to the government���s insistence last year to bring down prices. But now they are ready to freeze or cut prices even if it means an erosion in margin.

JK Cement Group executive president RG Bagla says the new capacities, ban on export and increased import from Pakistan have increased supplies in the market. ���The period from April to June is considered to be the peak season when prices go up. But it hasn���t happened,��� he explains. The industry has added around 15 million tonnes per annum capacity in the January-March quarter, including 10 million tonnes in March alone. The capacity has now gone up to 189 million tonnes.