The finance minister’s strange war against rising cement prices continues. No serious economist says that a drop in cement prices to Rs190 per 50kg bag—the minister’s preferred price—will bring down inflation significantly. In fact, the current rush to impose such indirect price controls will put off new investments and condemn us to high cement prices for many years.
But, for now, let’s look at a more immediate issue. Let’s say the cement companies are eventually forced to toe the line. They bring prices down to Rs190, from an average of around Rs220 today. India produces 14.5 million tonnes of cement a year. So a Rs30 cut in the price of a 50kg bag will bring down the revenues of the cement industry by around Rs870 crore. User industries could see their profits rise by the same amount.
The question is: why is the government so keen to transfer Rs870 crore a year from cement companies to cement users?