A day after fair trade regulator Competition Commission of India (CCI) conducted raids on LafargeHolcim, parent firm of leading cement manufacturers ACC and Ambuja Cements, as well as on Aditya Birla group firm UltraTech Cement and Shree Cement, the Builders Association of India (BAI), the apex body of the construction industry, reacted to the development.
Officials at BAI, which comprises over 20,000 business entities, have said that while they ‘appreciate’ the action taken, there is no reason why cement companies should be increasing prices during the Covid pandemic.
“We appreciate the action taken by CCI. The main issue here is that there is no question of increasing the price of cement during the pandemic as construction activity is not in full swing. The price rise is a concerted effort on their part to choke the cement supply,” Mu Moahan, President, BAI, told Moneycontrol.
Prices of cement have shot up by 30 to 50 percent since the onset of the pandemic. The price is almost Rs 400 a bag today, Moahan said.
It should be noted that BAI’s complaints before the Competition Commission of India are still pending. “These were filed in 2017 and 2018,” he said.
Appeal to the PM
BAI has also sent a representation to Prime Minister Narendra Modi to constitute a Cement Regulatory Authority to curb cartelisation and undue profiteering.
“We have also sent a representation to the government to set up a regulatory body. There is a regulatory body in every field today — mobile, telecom, coal, stock exchange and real estate. That is the need of the hour,” he said.
The letter, which was sent to the PM recently, said: “We earnestly request you to kindly consider appointing a Cement Regulatory Authority to prevail upon the cement manufacturers from indulging in unethical trade practices, which causes irreparable damage to the country's economic growth.”
Companies’ statements
In its regulatory filing, Ambuja Cements Limited has confirmed the development, stating: “The Competition Commission of India (‘CCI’) has initiated an investigation against cement companies in India including Ambuja Cements Limited regarding alleged anti-competitive behaviour.”
“Ambuja Cements is of the firm view that it has acted and continues to act in compliance with competition laws and are fully cooperating with the investigation and providing all necessary information to the authorities. Ambuja Cements Limited has a long-standing commitment to fair competition as reflected in its Code of Business Conduct and Ethics.”
ACC also said in its regulatory filing that “the Competition Commission of India (“CCI”) has initiated an investigation against cement companies in India including ACC regarding alleged anti-competitive behaviour. ACC is of the firm view that it has acted and continues to act in compliance with competition laws and we are fully cooperating with the investigation and providing all necessary information to the authorities. ACC has a long-standing commitment to fair competition as reflected in its Code of Business Conduct.”
Earlier CCI actions
In 2012, the competition watchdog had determined that a cartel of cement manufacturers was manipulating the selling price of cement.
In 2016, CCI had imposed a penalty of ₹6,308 crore on 10 cement manufacturers and the Cement Manufacturers Association (CMA) for cartelisation. Ten percent of the amount has been paid. CMA is the apex body of large cement manufacturers in India.
CCI had also earlier issued a ‘cease and desist order’, against which the manufacturers moved in appeal before the National Company Law Appellate Tribunal, which in its July 2018 order upheld the penalty.
An appeal filed by the cement manufacturers is now pending before the Supreme Court since October 2018.
The Parliamentary Standing Committee of the Ministry of Commerce had also recommended constitution of an authority and noted that one of the reasons for the rise in cement prices is the profit motive of cement companies. It had said the proposed regulatory authority should regulate cement prices to curb tendencies of market dominance, under-utilisation of capacity and creation of artificial scarcity.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
