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Cement cartel rigged prices for 17 years

The MRTPC orders cement manufacturers to stop acting together to keep prices artificially at high levels, reports G Choudhury.

business Updated: Dec 20, 2007 21:29 IST
Gaurav Choudhury

The country’s cement industry received a jolt on Thursday when the Monopolies and Restrictive Trade Practices Commission (MRTPC) said it saw a cartel among domestic manufacturers and ordered them to stop acting together to keep prices artificially at high levels. The order holds no punishment for some of the biggest names in the industry, but castigates big companies for acting in unison for 17 years against consumer interest.

“They have been acting concertedly….” The commission said of 41 manufacturers. The ruling is in line with a law that mandates that measures that go against the competitive spirit and consumer interest can be stopped.

Commerce and industry minister Kamal Nath on Thursday said that the government was looking into the MRTPC order. A senior official in a leading cement company said that the industry would abide by the MRTPC order.

“We issue a ‘cease and desist’ order against the respondents…and direct them not to indulge in any arrangement directly or indirectly through the instrumentality of Cement Manufacturers Association (CMA), or otherwise in fixing the prices of their produce in concert or in follow up of a concert,,” the Commission headed by Justice O.P. Dwivedi said.

However, the order that came after 17 long years is unlikely to have any immediate impact on cement prices. The commission observed that there is no fine prescribed nor there is any imprisonment to anybody. “The adverse finding, if proved, is in the nature of showing a yellow card only,” it said.

The commission also directed the cement companies to file a compliance affidavit within eight weeks. The inquiry into possible “cartelisation” was directed at 41 cement companies, including top cement makers Ambuja Cements Ltd, ACC Cements Ltd, India Cements Ltd, Madras Cements Ltd Shree Cement Ltd, Dalmia Cement Ltd and Larsen & Toubro.

The commission, which had initiated inquiry in 1990, said that cement companies have made no effort to justify the price rise on the basis of cost. The MRTPC Director General of Investigations had alleged that the companies were imposing unjustified cost on consumers by way of price manipulation.

Cement manufacturers courted controversy shortly after presentation of the Union budget this year after the government charged them of artificially raising prices.

The price of cement in India has reached a level of around Rs 240 for a 50 kg bag, as compared to the landed cost of imported cement which is expected to be around Rs 170 per 50 kg bag.

Cement manufacturers had increased the prices of cement by Rs 12 per 50 kg following the proposal in the budget to introduce a differential excise tax regime. The government had proposed to reduce the excise duty to Rs 350 from Rs 400 per tonne on cement whose retail price is not more than Rs 190 per 50kg bag. On cement that has a higher retail price, the excise duty was fixed at Rs 600 per tonne.