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Cement is emerging as a bit of a cause celebre for analysts who think a majority of Indian companies brazenly form cartels. Since the decontrol of cement prices in 1989, collusive price fixing exists in the sector. Of late, the matter was in the news again as the government said that they had concrete evidences against Grasim, UltraTech, ACC and other players that prices are being fixed and were consequently slapped by the notices from MRTPC.

In the race for market share and the quest for bridging the vast demand-supply gap, Grasim & L&T and ACC & Gujarat Ambuja (owned by Swiss cement giant Holcim) asked dealers in Mumbai to exclusively sell their cement bags for a commission or face a halt in supplies. “We have been told we would get about Rs.2.25 extra per bag if we exclusively sold products of both these cement majors,” one Mumbai-based dealer was quote saying in a leading financial daily. Cement companies have used the demand- supply mismatch equation to justify the pricing, A.K. Jain, Whole time- Director, ACC, says, “Cartels don’t work because of the level of fragmentation. However, it gives an impression that there is a cartel in terms of prices. Cement behaves just like a commodity. So the prices of all producers more or less move together. It is not possible for one producer to have a very high price and another to have a very low price. So, if one producer raises prices, everybody else also increases prices and vice-versa. Therefore, it gives an impression that someone is sitting somewhere and controlling the prices.”

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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