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Cement import to contain prices

The Tamil Nadu government’s decision to import one lakh tonnes of cement and distribute it through the Civil Supplies Corporation must be seen as another signal to the Centre that it must intervene and rein in galloping cement prices. On paper, cement imports are allowed and taxes have been lowered. But the procedural obstacles, bureaucratically contrived delays on account of Bureau of Indian Standards (BIS) certification, have thwarted many an attempt to procure cem ent from abroad and contain domestic prices. Six months ago, the Andhra Pradesh Chief Minister wrote to the Prime Minister complaining about the delays built into BIS certification and suggesting alternative quality checks by competent agencies, including public sector undertakings designated by State governments. The reasoning behind this demand was sound but unfortunately New Delhi was unmoved. Through this financial year, cement prices have been climbing steadily, first breaching the Rs.200 per bag level and now ruling at anywhere between Rs.200 and Rs.270, depending on the place. Cement plants in the country are working at 95 per cent capacity (the total capacity is around 160 million tonnes) and expect to build an additional capacity of 13 million tonnes this fiscal year — the highest ever increase since 2001, when they added 16.2 million tonnes. In sum, demand is outstripping supply, cement manufacturers are profiteering from high prices, and imports are deterred by a certification procedure that is, in effect, a non-tariff barrier.

The responses by Tamil Nadu and Andhra Pradesh indicate the frustration of State governments in the face of rising construction costs that hurt ordinary people as well as major government projects and have an inflationary impact. Many mega projects of governments and their agencies, private sector projects, and the housing sector have been subject to a severe cost escalation. Infrastructure projects absorb 40 per cent of the cement produced while the housing sector takes the remaining 60 per cent. Imports are a well-recognised means of containing prices. Countries like Thailand and Pakistan may be ready to export cement but the trade finds the certification procedure a serious deterrent to import. It will be unconscionable and also politically damaging for the Centre to continue to turn a Nelson’s eye to the problems faced by State governments and ordinary consumers as all building costs escalate sharply. The economist Prime Minister needs to intervene urgently to see that the practical restrictions on the import of cement are lifted in the public interest.

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