SUDDENLY EVERYONE is caught
unawares by the spiralling cement prices across the country.
There seems to be no respite in the immediate future
too. The consumers in the State are the most surprised lot.
Many were under the illusion that the cement industry
has a "hidden capacity" to meet any increase in demand.
They thought they would enjoy the low prices for
a prolonged period.
Alas, it was not to be!
Due to various reasons, such as higher than expected
cement prices, the recent Government orders on building rules,
water shortage and labour shortage some consumers have deferred
construction activity in the last six months.
This resulted in pressure easing off the cement
industry and prices stayed within manageable limits.
They could supply enough to meet the demand.
Now, the arrival of monsoon has raised hopes for
some wishful thinkers that the cement prices may see a dip.
So, they are deferring their building plans. Such
deferred demand will put the industry under tremendous pressure
in the post monsoon scenario.
Unwise decision
This will further worsen the situation and the prices may
go up to an unpredictable and irreversible range. The cement prices
might witness a price range above Rs. 300 for the first time in
India and may stabilize in the Rs. 265 to Rs. 275 bandwidth.
For the country to maintain the current 8 per cent
plus GDP growth, it is very essential that the infrastructure
development gather pace.
The preliminary data for April 2006 shows the investments
in the infrastructure sector at 6 per cent plus. When the country
is aiming at 8 per cent GDP growth on the strength of investment
in infrastructure, it is imminent that the cement consumption
would grow at double digit levels.
The construction practices in India are to undergo
radical and market structured changes to have uniform cement prices
throughout the year.
We must get over the age-old practice of halting
all works for four months once the monsoon sets in. This will
not help the construction sector to maintain the required growth
and will further add to the confusion in prices. The reason is
cement industry cannot produce more cement in some months and
less in some months.
So when the demand goes down industry can easily
meet the supply target, but when the demand goes up the industry
cannot be expected to meet the demand.
As the production capacity of a continuous process
industry like cement will be equal on every day, it cannot go
up one day and reduce another day diametrically.
Cement cannot be ground and stored in huge quantities
as the Industry does not have such huge storage facilities.
Uniform demand
So it is better we have uniform demand except on the days of rain.
In the past as there was surplus capacity all these changes were
faced by the industry easily.
Due to the present tight supply-demand situation
it will not be possible for the industry to meet the erratic demand.
Hence we should look for change in construction
practices to keep the progress of the work and also to have the
benefit of uniform and predictable price levels during the year.
