Cement gets Dearer
Hurt by a Rs. 100 per tonne excise duty hike in the budget, earlier this year, over the increased rail freight, cement was only to get dearer. Cement prices have risen stridently, especially, in the northern part of India, during the course of a month, after a dismal first quarter (Apr-Jun) that saw marginal Cement players struggling to report profits, over their operating costs. However, the price-raise was basically a correction and not based on supportive demand revival. Builders, largely troubled of a consistent downward trend in the market, now, had this new one, to cope up with. Builders are actually being hassled by Cement, everywhere. In a recently concluded suit, in a Delhi court, Dalmia Cement (Bharat) got a favourable order, wherein it sought damages from a builder alleging that it had used substandard material in constructing their building and the work was not completed in time. However, the matter was of seventies, but the builder was ordered to pay up the damages, now. Laying down a precedent, the court forced exemplary costs, on the builder, for delaying handing over of the building, within time, to the plaintiff purchaser, in lieu of any financial loss or physical inconvenience suffered by them.
Cement prices have jumped by almost one-third, in general, over the past two months, in all the major cities, despite demand from the real estate industry, consistently, being low. This has put builders in a troubled state, considering an over-all sluggish market.
The builder body, Confederation of Real Estate Developers’ Associations of India (CREDAI), has blaimed it on a cartelistic Cement conglomerate and plans to advance the matter to the Competition Commission of India (CCI). By the way, it filed a similar complaint, last year, too. Their part of argument suspects a systematic shortage of cement in various regions to quote deliberate prices. They have a valid point, here. See, if the real estate sector is going down and not so many new launches of projects are happening, that is, the demand for cement is not picking up then how come the cement prices rising, unless there is a pre-arrangement between cement companies. Anyway, the real estate is the biggest consumer of cement.
The Builders’ Association of India (BAI) had filed a complaint with the CCI, way back, in 2010, in which it alleged that cement companies were getting together then, to fix cement prices. It had filed the complaint against 10 top cement manufacturers and the Cement Manufacturers’ Association (CMA). CCI had later, in June 2012, imposed a penalty of Rs. 6,300 crore, on these companies. The Appellate Tribunal stayed the order in 2013 and asked the companies to deposit 10% of the amount, till the time their appeal is pending. The case is still running.
Meanwhile, the newness is approaching the Cement, with innovative low-carbon cement and Reliance launching the sale of cement, via online means.
Reliance Cement had forayed into online selling, making the facility available for a minimum order of 25 bags, which would be delivered to the customers, within 48 hours, as per the company’s claims.
The Limestone Calcinated Clay Cement (LC3) can help reduce CO2 emissions by about 30% and is made using limestone and low-grade clays. LC3 is being jointly developed by Indian and Swiss researchers, is set to grow in India where the demand for cement will increase hugely as the country embarks on a $1 trillion infrastructure development plan.
On the basis of the present government’s intentions to develop better infrastructure in the country, as generally perceived, and from time-to-time announcements of cement-intensive projects, like 100 Smart Cities and Housing for All by 2022, the Cement market sees a bright future, for itself. It also hinges its hope around a cut in interest rates, which may translate into increased participation by retail home buyers. In the interim, they have very little to do, except from keeping control over their expenses. They have all the time on earth otherwise, to get engaged in something fishy, which the developers are alleging. But, no conclusions need to be drawn here, as know only, half the story.