Every industry is prone to cartelisation. Worldwide, cartels are perceived as hazardous to growth. Although many countries have a strict competition law, cartels function without panic. The Centre and the state governments should establish a regulator on the lines of RERA or TRAI for cement trade.
As Adam Smith pointed out, “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
In India, cartels are present in both the manufacturing and service industry, indicating the scandalous interconnection between legislators and capitalists.
Construction is one of the most important economic activities contributing to maximum GDP growth of our nation. Housing and real estate industry consume about 65 per cent of cement production. There are about 180 large and 360 small cement plants operating in India with an installed capacity of 330 million tonnes. Approximately 21 business houses control 90 per cent of the market. Two groups namely, Holcim and Aditya Birla control 40 per cent of the market.
One of the worst affected states of India due to cartelisation of the cement industry is Tamil Nadu, a prime cement consuming state. There are about 20 plants situated in Tamil Nadu with a capacity of 33 million tonnes. Chennai, one of the fast developing cities, has shown a tremendous infrastructural and housing expansion.
In recent times the Builders’ Association of Tamil Nadu while highlighting the adverse impact of cement price hike, said that the price of a bag (comprising 50 kilograms) of cement available in the state has increased from 36 to 44 per cent and the bag which was available at Rs 250 has been priced at Rs 340 to Rs 360.
Cement companies have been blamed for generating an improper gap between demand and supply. In spite of the state government’s strict warning to nationalise the cement manufacturing units, nothing has been changed. Even ‘Amma cement scheme,’ which was introduced as a remedial measure to check the rising prices, was not able to transfer the intended benefits to the end users.
Lesson not learned
The watchdog Competition Commission India (CCI) had slapped Rs 6300 crore penalty in 2016 on eleven leading companies – Ambuja Cements Ltd., ACC Ltd., Jaiprakash Associates Ltd., Cement Manufacturers’ Association, Century Textiles & Industries Ltd., The Ramco Cements Ltd., J.K. Cement Ltd., The India Cements Ltd., Ultra Tech Cement Ltd., Nuvoco Vistas Corporation Ltd. and Binani Cement Ltd. for cartelisation of cement prices.
Although all the above companies filed the appeals, the National Company Law Appellate Tribunal (NCLAT) has upheld the penalty imposed by the CCI by way of judgment dated 25 July 2018. The NCLAT also defined the term ‘relevant market’ although the Supreme Court has clarified that the determination of the ‘relevant market’ is not a mandatory pre-condition for undertaking an assessment. However, cement manufacturers have not yet learned a lesson from the past.
The Centre and the state governments should establish a regulator on the lines of RERA or TRAI for cement trade. Or else the cement cartel will be untouched by any law in India and rear its ugly head from time to time. The dirty lobby between our politicians and industry will continue promoting unethical practices and this association will definitely torture our economy.
– Shivanand Pandit
