As cement prices across India head north after displaying softness for over a year, consumer associations and infrastructureNSE 0.00 % experts remain divided on the reason behind the increase: Supply controls or sustained revival in demand. A property-industry association in south India attributed the price increase to coordinated supply controls, an alleged monopolistic practice that has earlier drawn the attention of the federal competition panel.
“The companies are indulging in cartelisation, which is evident as the demand has also not dramatically gone up,” said WS Habib, president of Confederation of Real Estate Developers Association of India (Credai), Chennai.
According to research reports, cement prices in February increased by Rs 24-25 per bag of 50 kg, but the increase was more pronounced in south India, where prices increased by more than Rs 60 per bag since January after manufacturers raised prices twice last month. Prices typically are soft in the peninsula through the winter months because the region receives northeast monsoons, preventing construction.
Mahendra Singhi, CEO of Dalmia BharatNSE -0.16 % and President of the Cement Manufacturers’ Association (CMA), could not be immediately reached for his comments.
India is the world’s second-biggest producing and consuming market for cement, and prices are determined largely by local logistical factors. Typically, cement sales correlate with broader economic growth by a factor of about 1.3 in India. If underlying demand remains muted, the current phase of higher pricing may not sustain beyond a couple of months, said some cement analysts. Infrastructure consultants, however, believe demand might be reviving, prompting companies to raise prices.