Making the announcement in the Lok Sabha as soon as it met for the first working day of the session, prime minister Manmohan Singh said a formal motion for constitution of the Joint Parliamentary Committee would be moved soon
New Delhi: Giving in to opposition demands, Prime Minister Manmohan Singh today announced the government's decision to set up a Joint Parliamentary Committee (JPC) to go into the second generation (2G) spectrum scam, saying the country could "ill afford" disruption of the crucial budget session of Parliament, reports PTI.
Making the announcement in the Lok Sabha as soon as it met for the first working day of the session, Mr Singh said a formal motion for constitution of the Joint Parliamentary Committee would be moved soon.
"We could not succeed in spite of our sincere efforts" to persuade the opposition not to insist on a JPC probe, Mr Singh said.
Asserting that his government was committed to root out corruption, the prime minister said "all effective steps" were taken to convince the opposition in this regard.
"We can ill afford a situation where Parliament is not allowed to function during the crucial budget session. It is in these special circumstances that our government agrees to the setting up of a JPC," he said.
Mr Singh requested speaker Meira Kumar to proceed with the process of formation of the JPC and said a formal motion would be moved soon.
Welcoming the government's move, leader of the opposition Sushma Swaraj thanked the prime minister and leader of the house Pranab Mukherjee for the decision.
"We should not see this as a victory or defeat. This is a victory of democracy. We should all work together putting aside any talk of victory or defeat," she said.
Recalling that the Winter session of Parliament had been lost on account of controversy over 2G spectrum allocation, Mr Singh said, "In paralysing Parliament, I believe, we all do disservice to those who have elected us."
The opposition has been adamant on a JPC probe in the 2G scam, which according to the Comptroller and Auditor General (CAG), has resulted in a presumptive loss to the tune of Rs1.76 lakh crore. A Raja, who was forced to resign as telecom minister three months back, is now in jail.
Dubbing it as the biggest scam in independent India, the opposition had made it clear that it would not allow the budget session to function properly if the JPC was not announced today.
Insisting that the government was committed to root out corruption, the prime minister listed the steps taken by the government on the 2G issue which included Central Bureau of Investigation (CBI) probe supervised by the Supreme Court and the independent inquiry conducted by former judge Shivraj Patil.
He also pointed out that the Public Accounts Committee (PAC) of Parliament was also seized of the matter and the government was fully cooperating with it.
"We are a functioning democracy and must strive to resolve our differences in a spirit of accommodation and collaboration, not confrontation," he said, hoping that it would "renew our confidence in India's forward march."
The government has already made it clear that a formal motion for creation of the JPC would be moved on Thursday by telecom minister Kapil Sibal.
This would be the first JPC to be set up since the Congress-led United Progressive Alliance (UPA) came to power in May 2004.
AIADMK leader M Thambidurai demanded representation for all political leaders on the JPC to ensure that there was no feeling of neglect among the members.
Gurudas Dasgupta (CPI) said he would not like to thank the prime minister for agreeing to the opposition demand for a JPC.
He said it was better late than never that "good wisdom has dawned upon the government" which led to the announcement of a JPC to probe the 2G spectrum scam.
"This is not a question of thanking or complimenting the government or the prime minister. The government and the prime minister had only done their duty by responding to the opposition demand and ensuring that Parliamentary norms are adhered to," he said.
SP leader Mulayam Singh Yadav said the delay in announcing formation of the JPC had affected the credibility of the government.
"The people of the country have come to know that the government had something to hide," he said.
NDA convenor Sharad Yadav wanted that the JPC should also go into alleged irregularities in the conduct of Commonwealth Games, the S-band issue relating to ISRO and the Adarsh housing scam.
He said the judiciary and media were actively involved in probing the issue and the announcement by the prime minister would also allow Parliament to be part of the exercise.
Basudeb Acharia (CPI-M), Arjun Charan Sethi (BJD), K Chandrasekhar Rao (TRS) and Raghuvansh Prasad (RJD) also welcomed the announcement of formation of the JPC.
In the Rajya Sabha, the prime minister made a similar statement on the JPC formation.
Soon after he completed, leader of the opposition Arun Jaitely said he was "disappointed" over the contents of the statement.
"The issue could be resolved in a more gracious manner," he said adding the content of the PM's statement showed the government had done everything and the JPC was formed only because Parliament was paralysed.
Mr Jaitely said the formation of the JPC could have been done in a graceful way rather than in a "tasteless" manner by projecting that the opposition had coerced the government to do so.
BJP members including SS Ahluwalia and Ravi Shankar Prasad as also AIAMDK member M Maitreyan took objection to the content of the PM's statement.
Deputy chairman K Rahman Khan disallowed members saying it was agreed that no discussion would take place on the statement.
According to estimates, demand for cement is likely to go up by 10%, while production may soar by 12%—analysts expect the demand-supply mismatch to touch 107.70 million tonnes
Cement producers may face a tough time in the next fiscal due to soaring input costs and a surplus in supply, amid weak demand.
"We expect additional cement capacities of around 70 million tonnes (MT) to come on stream in the next financial year. However, demand growth has been lagging," according to CRISIL, a ratings & research agency.
"Demand spiked by only 4%-5% during the nine months ended December 2010, as compared with around 10%-11% during the same period of the previous year," added the agency.
Industry experts say that due to the imbalance in the demand-supply situation, prices of cement are likely to remain subdued over the long term.
Currently, prices of cement are around Rs270 per bag for 'A' grade cement players-and around Rs265 per bag for lower grade manufacturers.
"Demand is likely to grow by 10%, while (the) production rate would be 12%. Until there is considerable demand from the construction and infrastructure sectors, demand will be behind production, and that may create pressure on cement companies," an analyst from a research firm told Moneylife, preferring anonymity.
According to Fitch, a rating agency, the country's demand-supply mismatch may go up to 107.70MT in FY2011-12.
A weak performance of the construction sector during the third quarter depressed demand for cement. The prolonged monsoon put many construction projects on hold, while the execution of a few projects were badly impacted due to delays in acquiring land and obtaining approvals and clearances.
The Reserve Bank of India's move to increase interest rates is also slowing down fresh projects in the market.
However, experts also feel that prices will remain firm until the seasonal demand peaks till April.
"Prices will not come down until April, as there is seasonal demand. The government has set its target to spend money by the end of March; so historically, there is always a peak period till April," Ravi Sodah, an analyst with Elara Securities (India) Private Limited, told Moneylife.
The country' second largest cement producer ACC reported a 31% drop in consolidated profit to Rs10.78 billion in 2010 because of falling selling prices and high input & power costs. Consolidated sales came down by 2.6% to Rs82.60 billion.
Ambuja Cements' net profit inched up by 4% to Rs12.60 billion in 2010 from Rs12.20 billion in 2009. Net sales grew by 4% to Rs73.90 billion.
India largest cement producer, UltraTech Cement, saw its net profit plunge by 36% in the October-December quarter.
CRISIL has also said that as capacity additions will exceed incremental demand, operating rates are expected to remain below 80% over the next few quarters, resulting in reduced flexibility to raise prices. It will also impair the ability of producers to pass on input costs to customers. This has been a rising trend.
However, Mr Sodah added, "Prices will depend on how cement players are able to manage the surplus. The southern part of the country holds higher surplus. But cement producers across India have been able to maintain some kind of production discipline."
"Prices should come under pressure in this situation, according to fundamentals, but due to better production discipline, cement producers are managing to hold prices. In case this discipline is broken, then we will see a large fall in prices," added Mr Sodah.
However, soaring input costs and weak demand might dent the margins of cement producers.
ACC has said in a recent press release, "The company sees that demand for cement is likely to grow in the coming year at 9%-10%. However, some bottlenecks faced by the industry such as regular supply of major inputs like coal, slag, power and rail transport are likely to continue. We also expect that the pressure on selling prices will be maintained in the near term."