The government has gone into an overdrive to track alleged cartelization in the cement industry.
Based on a complaint filed by the Builders Association of India (BAI), the office of the Director General of Investigations and Registration (DGIR), which comes under the ministry of corporate affairs (MCA), has initiated investigations against 45 cement companies for alleged cartelization.
This is over and above the six cases of cartelization that are already pending with the Monopolies and Restrictive Trade Practices Commission (MRTPC), also part of the ministry.
“We started work on this (investigation) in October 2006 and have brought 45 cement companies in the ambit of our investigation,” said a senior DGIR official who did not want to be named. The DGIR can initiate investigation on its own and also conduct them on behalf of the MRTPC.
Rajpal Arora, honorary secretary, BAI, said that the association took up the matter with DGIR when it realized that it observed a steep escalation in prices of cement. “Between December 2005 and April 2006, the price of a 50kg bag of cement, rose from anywhere between Rs125 and Rs145, to Rs200 plus. The input costs, however, had not risen in the same proportion.”
Cement comprises 13-15% of the cost component of any construction project. There are 130 large cement plants and 365 mini cement plants in the country. The installed capacity of large plants are 160mt (million tonnes) per annum and total production is around 140mt per annum.
MRTPC, in another case, on Tuesday, has issued notices of inquiry against 14 leading cement companies as well as the Cement Manufacturers Association (CMA) for price fixing and cartelization.
The inquiry is based on the preliminary report of the DGIR and according to the official, the case will have its first hearing on 25 October this year.
The notices were first reported by The Economic Times.
In another case, which has been pending before the MRTPC for 17 years (since 1990), hearings are still going on. “The hearing for this particular case, where the parties involved are DGIR and Cement Manufacturers Association, has been going on,” said an MRTPC official, who did not wish to be named. Yet another case, DGIR versus ACC, dates back to 1992.
Experts say delay in disposing off cases are both on account of archaic laws and difficulty is proving cartelization cases.
“Nevertheless, countries like Mexico, Romania and Germany have disposed off cases of such cartelization and I hope the MRTPC will also be able to finalize the pending cases,” said an expert in the area of restrictive trade practices, who did not wish to be identified.
He also added that big players such as Lafarge, Holcim and Heidelberg Cement have come under the scanner of governments in various countries.
O.P. Dua, senior advocate, who has been arguing the DGIR versus CMA case initiated in 1990, despite the difficulty in proving cartelization, is hopeful of winning the case. “The matter got delayed as there were 45 cement companies involved and each one took its own time to file affidavits etc. and besides, the matter was referred to the high court in between,” said Dua.
He added that in another case, which is also pending with the MRTPC, he has found clear evidence of price fixing by cement manufacturers in Madhya Pradesh.
The CMA is involved in more than half the cases that are pending before the MRTPC.