In a first-of-its-kind order, the Competition Commission of India (CCI) has imposed a penalty of over Rs 6,000 crore on 11 leading cement producers after finding them guilty of forming cartels to control "prices, production and supply" of cement in the market.
The (CCI) is a watchdog which was set up under an Act of Parliament to prevent practices having adverse effect on competition, promote and sustain competition in the markets, protect the interests of the consumers and ensure freedom of trade carried on by other participants in the market.
The CCI, on Friday, imposed the penalty on cement manufacturers for violating the provisions of the Competition Act 2002, which deals with anti-competitive agreements, including cartels. This whopping penalty has been imposed on cement-producing giants such as ACC, Ambuja Cements Ltd, Ultratech Cements, Grasim Cements (now merged with Ultratech Cements), JK Cements, India Cements, Madras Cements, Century Cements, Binani Cements, Lafarge India and Jaypee Cements.
"The CCI's praiseworthy decision to impose penalty is the direct fallout of some pro-active steps taken by Parliament's standing committee on commerce," former union minister and BJP vice-president Shanta Kumar said here on Saturday. Shanta was a member of the standing committee.
While Parliament passed the Competition Act when the NDA was in power, he said, three vital sections were not notified by the Congress-led UPA government. "Two years ago, when the standing committee, of which I was a member, toured the country to review the functioning of cement companies, it noticed that some vested interests did not allow the Act to be notified in letter and spirit, making the CCI a toothless body," he said.
Following the committee's intervention, he said, three clauses - which were put on hold - were notified and that set the ball rolling for the smooth functioning of the CCI. "The standing committee had said what now the CCI has proved, that the cement companies have formed a cartel to monopolise the trade," Shanta, a former chief minister of Himachal Pradesh and now a Rajya Sabha MP, said.
According to the CCI order, it found cement manufacturers violating the provisions of the Competition Act. The CCI issued the order after "investigation by the director general (CCI) upon information filed by the Builders' Association of India".
The commission has imposed a penalty on cement manufacturers regarding their profits for the years 2009-10 and 2010-11. "The penalty amount so worked out amounts to more than Rs 6,000 crore," said the CCI statement. The commission has also imposed penalty on the Cement Manufacturers' Association.
While imposing the penalty, the commission considered the "parallel and coordinated behaviour of cement companies on price, dispatch and supplies in the market". The commission observed that the act of these cement companies in "limiting and controlling supplies in the market and determining prices through an anti-competitive agreement" was detrimental to the entire economy.
The contravening cement manufacturers have been directed to deposit the penalty amount within 90 days. They have also been told to "cease and desist" from indulging in any activity relating to agreement, understanding or arrangement on prices, production and supply of cement in the market.
"The CCI order points towards how and why the prices of commodities are skyrocketing. The rising madness of making money needs to be stopped. Financial mismanagement, wrong policies and corruption are responsible for the price rise," said Shanta.