The fight between manufacturers of inputs like cement and steel, and their users is intensifying, with both sides trading charges of faulty trade practices.
In the latest chapter of the tussle, the South India Cement Manufacturers Association (SICMA) has issued a statement “strongly condemning” the strike called by the Builders Association of India (BAI) for February 12, against rising input costs.
The builders have alleged that cement prices have been increased from Rs 280 a bag to Rs 420, forcing them to stop many of their projects. Nearly 60,000 builders and construction workers are expected to participate in the strike slated for February 12.
The cement industry association, however, said all the allegations were a 'misinformation.' In a statement on February 10, the cement industry association said it “strongly condemns the strike for two reasons – spreading misinformation among common public and for their intent to take advantage of the economic recovery to further increase prices of real estate, which is already at unaffordable levels.”
SICMA has also written to Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman to “look into profiteering being done by builders.”
The allegations come just a day after Moneycontrol reported that the Competition Commission of India has began an investigation against steel companies for alleged price cartelisation. The probe followed a demand voiced from several quarters, including auto and real estate industries that use steel.
Steel prices have increased by nearly half since June 2020, when the government imposed anti-dumping duty on some steel products.
Union Minister for Road Transport and Highways Nitin Gadkari has said there is a cartel in the cement and steel industries, and cement manufacturers are exploiting the situation in the real estate sector, as prices of the two commodities rise.
"Cement factories are exploiting the situation. It's not in national interests. We are planning to implement infrastructure projects worth Rs 111 lakh crore in the next five years. If rates of steel and cement continue like this, it'll be very difficult for us," Gadkari was quoted as saying.
But the cement association doesn't agree to the charges.
What SICMA said
“BAI has a lot of explanation to do,” the statement said, listing a series of questions which “remain unanswered” as follows:
1) Citing cement costs increase flat construction cost when cement rate for builders across markets remains Rs 6,000/mt. “That means only Rs 150/sq. ft of built up area constitutes cement costs. The amount being so low … is this not hoodwinking gullible consumers?”
2) CAGR of cement has over the past five years remained unchanged, “yet they claim that price of cement has gone up by Rs 100/bag. Is it their intent to take higher input credit of goods and services tax (GST) by giving non-genuine bills?”
3) SICMA claimed to have conducted “detailed cost accounting of flat construction” and said that the total cost of a flat “is not even 50 percent of their sale price. Why should the Government not intervene and ask them to reduce prices, so that consumers at large, benefit?”4) It also questioned why builders are not reducing prices to sell off inventory “instead of holding on to finished or semi-finished flats in a cartelised manner.”
5) It further asked for details on actions BAI has taken against “unscrupulous builders who have duped buyers by either delaying or abandoning projects after taking money from them,” adding that the litigations in various courts and the National Company Law Appellate Tribunal (NCLAT) “doesn't put the builders lobby in a very good light.”
“We believe that instead of supporting initiatives by states and Centre to bring economy back on growth trajectory, BAI is trying to take advantage of the situation by citing unfounded reasons to increase the realty prices, instead of reducing it drastically and help common consumers who is looking for a roof over their head,” the statement read.
The cement industry is striking back strongly because it understands the risks involved.
The Competition Commission of India had come down heavily on cement companies, many of whom saw their offices being raided in December 2020. In 2016, the CCI had slapped a fine of Rs 6,700 crore on 11 cement makers, including UltraTech, Ramco, ACC and Lafarge.
Offices of some of these companies were raised in December 2020, as part of a fresh probe against price cartelisation.Steel companies too have maintained that domestic prices, despite the hikes, remained lower than international rates. Prices in China, Europe and the US - the three biggest markets - were higher than those in India.