The Hindu Business Line : Govt tells cement cos to self-regulate prices

Warning bells
The Government will be forced to take corrective steps if industry does not respond within 3 days.
It says `limitless profiteering' unacceptable.

The Minister for Commerce and Industry, Mr Kamal Nath, with cement manufacturers at a meeting in the Capital on Friday. - Ramesh Sharma

New Delhi , May 12

Worried over the "unacceptable and unjustified" increase in cement prices, the Government today told the cement manufacturers to give their suggestions by Monday regarding measures to reduce prices.

In a meeting convened by the Department of Industrial Policy and Promotion (DIPP), the Minister for Commerce and Industries, Mr Kamal Nath, told cement manufacturers that the unjustified increase in prices is unacceptable and that the Government cannot remain a silent spectator to a situation that impacts on other sectors of the economy.

The urgency on the part of the Government is also because the Opposition has asked for a calling attention motion in Parliament on Tuesday on the issue of cement price hike.

The meeting was attended among others by Dr Ashwani Kumar, Minister of State for Industry, Dr Ajay Dua, Secretary (DIPP), and senior representatives of the Ministries of Coal and the Ministry of Railways and top representatives of cement manufacturers.

Unjustified increase

"We would like the industry to self-regulate itself failing which the Government will necessarily need to apply the correctives to ensure that there is no unacceptable and unjustified increase in cement prices," Dr Ashwani Kumar told Business Line after the meeting.

According to an official release, Mr Kamal Nath had told the manufacturers that while the Government certainly wants the cement industry to grow and be a healthy industry, limitless profiteering is not acceptable.

"Our studies show that increase in input prices is not commensurate with the extent of the cement price increase. We want you to tell us by Monday what you are proposing to do. If we do not hear from you within the next three days, the Government will have to take whatever steps necessary to control the price rise and to explore all options," he said.

50% rise in prices

Simultaneously, Dr Kumar pointed out that even after taking all input cost increases into account, the rise in the retail price should have been only about Rs 16 per bag against the actual increase of Rs 41 per bag which had taken place.

Cement prices have increased by more than 50 per cent during the past five months since December 2005. While there has been an average increase of Rs 41 per bag since December 2005; the increase in Mumbai has been Rs 71; in Pune Rs 63; in Goa Rs 79; in Lucknow Rs 48; and in Delhi the price has gone up by Rs 45.

However, Dr Kumar said that since cement is a decontrolled commodity the Government couldn't control the prices directly.

"But we are looking at whatever powers the Government has in the existing legal framework that can be utilised to rein in the massive increase in prices through various regulatory mechanism," he said.