MRTPC may probe cement cartel

NEW DELHI: While the tussle between the government and the cement industry over price hikes and price-based excise duty stands unresolved, the investigation wing of the Monopolies & Restrictive Trade Practices (MRTP) Commission is planning a probe into the suspected cartel-like behaviour of the industry.

The director-general of investigation & registration (DGIR) is expected to seek an order in this regard from the commission next week as a preliminary inquiry has given credence to the suspicions of a cartel. This, however, could not be conclusively proved. Since a lot of previously loss-making companies have made significant profits in 2005 and 2006, there is a case for examining the dynamics of the sector in detail, the regulator feels.

Under the MRTP Act, in order to prove the existence of a cartel, the regulator has to establish that there was a meeting of minds to fix prices and that there was price parallelism. Since modes of communication are quite advanced these days, it is difficult to establish a meeting of minds, while companies have found ways not to be caught on price parallelism.

Instead of increasing prices on the same day, the market leader will make the first move, followed by others. Such price increases would be seen as a play of market forces. Proving the existence of a cartel is difficult the world over, although it can be felt in every walk of life, say experts. Therefore, governments encourage approvers to turn in other members of the cartel for a lesser penalty.

The alleged cartelisation in the cement sector first came to light when the company affairs ministry did a sample survey in Hyderabad that revealed unnatural shortage and price fluctuations. It then asked the DGIR to look into the issue. Later, the commission asked the DGIR to expand the scope of the probe from the top three players to the entire industry. The large market share a few companies enjoy and instances of cross-holding among them strengthen suspicions of a cartel.