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NEW DELHI, Feb. 26

THE domestic construction industry and retail consumers of cement may well have to reconcile to prices staying firm, although the haulage of cement over distances will be reduced marginally by the Railways.

Cement manufacturers have indicated that prices may not move southwards despite the rationalisation in the freight rates for cement. However, while the consumers would have to reckon with this scenario, the bigger players in the business having the advantages of economies of scale can look forward to improving their bottomlines, thanks to the cost savings.

"Cement prices are unlikely to immediately come down or get adjusted on account of this announcement. It is also very difficult to come to a conclusion on whether there will be a shift of traffic from road to rail on account of the Railway Minister's announcements. The road transport operators may well match the revised rates to retain traffic," said a construction industry official.

Industry estimates vary on the share of traffic between the railways and the road sector. The Railways carries between 30 and 35 per cent of the cement transported across the country. A marginal reduction in the freight rates may therefore not prompt a significant shift in this pattern in the near term, analysts reckon.

Although the cement industry is one of the few industry sectors that have managed to keep its head above waters during the prolonged industrial slowdown, a reduction in operating cost in this scenario is welcomed as it boosts profitability.

The country's leading cement company, ACC, which moves 50 per cent of its output by rail, hopes to benefit from this move, even though marginally.

"Any cost savings in the current business environment is welcome however marginal it may be. The big players enjoying economies of scale will benefit from such reductions," a cement industry official said.

The industry's lobbying arm, the Cement Manufacturers' Association (CMA) was quick to hail the Railway Minister's announcements saying that a sincere effort has been made to balance the requirements of the economy.

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