The Hindu Business Line : Controls on cement

With few resources to prove cartelisation among cement makers, the Centre could instead cut excise duty and ensure the benefits reach the consumers.

What more telling evidence is needed of the government’s helplessness at the rise in cement and now steel prices than its considering bringing back a 20-year-old law to check them? According to a report in this newspaper, the Industry Ministry is considering the use of Section 18G of the Industries (Development and Regulation) Act that permits the government to control prices and supplies of industrial products without recourse to the Essential Commodities Act. For those who might be wondering, the IDR Act of 1951 is defunct and Section 18G has not been used since cement prices were decontrolled in 1989. So, why is the Ministry wiping the dust off this control regime relic?

Panic appears the most plausible reason. For over a year, cement prices have been rising and policymakers from North Block, the PMO’s office and the Commerce and Industry Ministry have urged cement manufacturers to reduce prices. Last year, the Monopolies and Restrictive Trade Practices Commission intervened, trying to prove price cartelisation by producers. Predictably, it failed. Yet hints that the cement industry was acting like a cartel continued to do the rounds with some policymakers talking of actual cartels at work and others of cartel-type conditions. Now Mr Ashwani Kumar, Minister of State for Industry, has pointed out that his Ministry was studying price data and a decision on the status of cartelisation could be expected in a few days. But will the departmental inquiry finding be enough to justify the use of Section 18G when the more appropriate course would be to refer the issue to the Competition Commission of India — the most competent authority to determine the existence of a cartel? The problem, of course, is that the CCI is still in teething stage. Five years after the Competition Act created the body, Parliament finally approved it last August. Yet its provisions, many of which are international best practices, are yet to be notified. Policymakers hint that should happen this year but till then, the Government is left with few resources to judge cartel behaviour — except for the toothless MRTPC, the departmental inquiry and now, Section 18G.

Proving cartels is difficult under any circumstances and, often, when industries consolidate through mergers and acquisitions, the spectre of price-fixing rears its head. Till the CCI is in place, New Delhi must appear non-partisan between consumers and producers. Reducing excise duty on cement, even if that means losing revenue, would appear the best bet till such time anti-cartel mechanisms are in place. Ensuring that the benefits of the tax cut are passed on may be easier than proving price collusion.

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