Tired of cement price rises, builders plan own factories

Exasperated at repeated price rises by cement companies and complaining of a cartel by the latter, the Builders Association of India has announced a plan by its members to establish at least three factories to produce the key building material.

"We have decided to set up our own plants to cater to our own needs," BAI's president-elect, Cherian Varkey, said. The BAI is an apex body of engineering construction contractors.

The plan is to have an annual production capacity of five million tonnes per annum in each of the proposed factories.

BAI says it is looking at Andhra Pradesh, Rajasthan and Gujarat as sites for the proposed units. Initially, one such plant would be undertaken in one of these three sites, to be completed in three years.

B Seenaiah, senior member of BAI and managing director of BSCPL Infrastructure said the investment proposed for each was Rs 2,250 crore (Rs 22.50 billion).

"We plan to raise Rs 500 crore (Rs 5 billion) each as equity from various companies involved in construction and infrastructure and mobilise the balance Rs 1,750 crore (Rs 17.50 billion) each from banks and financial institutions. The proposed cement company will be run by professionals," he informed.

Adding, "Today, cement costs Rs 300 per bag, while it was priced almost half that last year during the same time. We hope that with the development of the proposed plants, cement will be available at Rs 150 per bag."

Bai noted a parliamentary panel had urged the government to undertake an independent study on cartelisation in the cement industry, with adequate penalties for erring parties.

There was also an earlier order of the Monopolies Commission in this regard, directing cement companies guilty of forming cartels to halt such activities, noted Varkey.