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Cement Thamasha

Reported by RJR, Edited by RJR | Updated: Apr 25, 2017 06:56:17

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By R.Jagadeeswara Rao.

The Tamasha of Cement Prices Hike :

Final Outcome Predicted.

            Once again there was steep hike in the prices of cement, an important input essential for all infrastructure development plans and construction activity, especially house construction activities. Both the centre and state governments wanted to give a big push to the housing schemes. While the Prime Minister Sri Narendra Modi’s government wants to give houses to all by 2022, the state government had also chalked out plans to construct two lakh houses for various sections of people in the society. Both required construction of houses in a big way, this means requirement of cement on a very large scale. Both the governments want to make use of real estate sector to achieve their targets. It is a sort of PPP (Public Private Participation)

It is in this back ground that cement manufacturing companies had allegedly formed into a cartel and announced steep in prices of cement by deliberately reducing their production and consequently creating artificial scarcity. The price of a bag of cement was hiked from Rs.260 a bag to Rs.390 a bag. Depending on demand, buyers were forced to shell down well over Rs.400 a bag. Now the immediate impact of this unilateral increase was felt by the real estate sector. Expectedly they raised a hue and cry ,formed joint action committees with organization using cement ,held press meets and threatened to ‘declare a holiday in construction activity’ unless the government intervened and see that the price of cement is slashed.

HERE ONWARDS,  DEVELOPMENTS FOLLOWED A WELL KNOWN PATTERN AND THE END RESULT COULD WELL BE PREDICTED WITH REASONABLE CERTAINTY ,IF THE PAST IS ANY INDICATION.

Holiday in construction activity means,  work on all housing projects in the private sector would come to standstill. Housing sector is the second largest provider of employment and a holiday in this sector means lakhs of workers would be thrown out of their employment. This would be brought to the notice of the government and the government expresses its unhappiness and sometimes anger over the hike in price of cement and forms a committee to deal with the situation and see that common man is not put to hardship. The government convenes a meeting with the cement manufacturers and demands to roll back cement prices immediately, failing which strong action would be taken. The cement manufacturers explain the rationale  behind the price hike. In the present case, the manufacturers had reportedly stated that the price hike was made keeping in view the GST, which,ironically, had not come in force as yet. The government refuses to buy this argument and insists on reducing prices of cement.

AN IMPORTANT ASPECT TO BE NOTED AT THIS POINT IS IT WAS NOT MADE CLEAR BY HOW MUCH THE PRICE OF CEMENT IS TO BE REDUCED.

The cement manufacturers ask for time to deliberate and take and decision.

This is the narrative of story so far.

WHAT WILL HAPPEN NEXT.

THE FOLLOWINBG IS THE MOST LIKELY SCENARIO THAT WOULD EMERGE.

Cement manufacturers would agree to slash prices. After strong bargain they agree to sell a bag of cement at a rate of Rs 330 to Rs 350 a bag and not at the previous price which was Rs.260 a bag nor at the hike price of Rs.390 a bag. However the cement manufacturers agree to supply cement for government works at the previous prices of Rs 260 a bag or at a nominal increase. The government convinces the real estate sector of the need to construct houses to meet its promise and offers them other incentives. The real estate sector finally agrees for the hike from Rs.260 to some where Rs.300 a bag. Since no sensible business man likes to bear the additional price of cement, it is finally passed on the consumer.

So the government is happy because ii is able to reign in cement manufacturers and get the price reduced SUBSTANTIALLY. The cement manufacturer is happy that he had finally hiked the price of cement SUBSTANTIALLY. The real estate dealer is happy that he passed on the burden on to the customer.

THE ONLY PERSON WHO IS NOT HAPPY IS THE CONSUMER WHO WOULD FINALLY BEAR THE BURDEN OF INCREASED PRICE OF CEMENT.

This was what had happened in the past. This is what is happening now. And this is what will happen in future as and when a price of any item is hiked by traders.

The author of this article would be happy if this narrative is proved WRONG!

 

 

 
Tags:  Thamasha
 

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