Cement companies are yet to receive any notice of penalty relating to manipulating the market.
But, going by news reports, if such a move is true, not only would it be unjust but will be disastrous to the economy, according to senior executives.
They were reacting to unconfirmed news reports that following an enquiry into a complaint from the Builders Association of India, the Competition Commission of India is set to penalise cement companies for unfairly controlling the market.
Mr A.V. Dharmakrishnan, Chief Executive Officer, Madras Cements, said the company has “not received any orders so far” from the Commission.
There have only been reports in the media claiming that many companies could face a penalty.
However, if this turns out to be true it would be ‘unfortunate.’ Also, such regulatory “over action” will impact the mood across sectors, vitiate the investment climate and shake the confidence of financial institutions.
Unclear environment policies, uncertain financial policies, high inflation and clearance delays have taken a toll on investments as it is, he said.
He pointed out the complaint had been filed by a builders’ lobby. But real estate prices have multiplied six to seven times in as many years.
Cement prices have appreciated by about 25 per cent during that time, he said. They were driven by cost increases across the board.
Cost of raw materials, freight, fuel and power have increased. Nearly one-third of the cement price can be attributed to taxes which come to over 30 per cent, including VAT and excise.
Power costs account for about 30 per cent of the manufacturing cost, he said.
There can be “no question of collusion or cartelisation” particularly in such a large industry. Price of a 50-kg bag of cement varies by Rs 50-60 across the brands, Mr Dharmakrishnan said.
Another senior executive in a large cement company said “let the order first come” so far there are only media reports of the Commission’s order.
But the industry could be badly hit as penalties can go up to 10 per cent of a cement company’s average turnover in the last three years.
However, the industry is “hoping that they do not mess up the situation even while the economy is not doing well”, the executive said.