Prices have gone up by 40-50 percent in North and Western regions since November 2005 when increased must have been no more than 7-8 percentage points because of price escalation in input costs. However, several factors have added on to the sharp increases in prices. First, the cost of electricity has gone up because of increase in oil prices. Second, a Supreme Court order in November 2005 banning overloading of trucks has increase transport inputs. Third, the cement manufacturers have to buy coal from the open market which is more expensive than buying it in auction lots from Coal India Limited.
Nath dismissed these claims by the industry saying, “he was responsible to the Parliament” and apparently wanted the cement manufacturers to take a cut in profits or absorb the costs as state-owned oil companies are forced to. He accused the industry of “limitless profiteering” on “unjustified and unjustifiable” high prices. It is not clear how Nath expects businesses to absorb costs when international developments, legal requirements, and cut back on subsidies affect cost of goods sold. It is also not clear if Nath wants to pursue the same line with other manufacturers too. A cutback on exports or a cess on exports will reduce export earning increasing trade deficit and ultimately affect the strength of the Rupee—the
weakest part of the Indian economy.
Nath wanted the industry to tell the Government steps that they would take to check price rises by May 15. In anticipation of a 8-10% cutback on profits, the stock market has eased 9% on stock prices on major cement manufacturers such as ACC< Gujarat Ambuja, Ultratech, and Birla Corp.
India is the 2nd largest manufacturer of cement of 150 million tons (mt) and exports 9-10
mt.
