The much awaited verdict of the Competition Commission of India (CCI) on real estate developers’ complaint against cartelisation among cement companies is expected next week.
Realtors have alleged that cement makers have increased prices by 50 per cent in the past six months and as much as 20 per cent after the Union Budget, blaming collusion for the supply problem. Cement companies say the complaint is “ridiculous”, as the prices are controlled by factors like demand and supply, railway freight rates and excise duty.
A 50-kg bag of cement used to cost Rs 170. It went up to Rs 250 before the Budget and costs Rs 300 now. Some developers are now including a cost escalation clause in their buyer-builder agreement due to uncertainty in the prices.
Cement companies defend that there was no cartelisation since cement is a commodity and all commodity prices move in tandem. Refuting the claims of developers cement makers say that cement accounts for just three to four per cent of the cost of the whole project. What about the remaining 97 per cent?”. They deny manufacturers are holding any stocks in godowns, and put the onus of escalating price over the increase in rail freight rates and general inflation.
The National Real Estate Development Council had in November moved CCI, alleging an unduly steep increase in cement prices. The installed capacity of large cement plants had increased from 223 million tonnes in 2009-10 to 234 mt in 2010-11. However, capacity utilisation in 2010-11 declined to 76 per cent from 83 per cent in 2009-10, it had said.