Companies & Sectors
Price cartelisation: 11 cement firms get Rs6,200 crore rap from CCI

In 2007, the MRTPC let off the cement companies with only a cease and desist order. This time the CCI has imposed a hefty penalty of Rs6,200 crore, equivalent to 50% of their profit for 2009-10 and 2010-11

New Delhi: The Competition Commission of India (CCI) today imposed a hefty penalty of about Rs6,200 crore on 11 leading cement companies including ACC, Ambuja Cements, UltraTech and Jaypee Cements for indulging in price cartelisation, reports PTI.

The other companies found guilty are Grasim Cements now merged with UltraTech Cements, Lafarge India, JK Cement, India Cements, Madras Cements, Century Cements and Binani Cements.

The industry body Cement Manufacturers Association (CMA) has also been fined.

The firms in violation of the competitive laws have been directed to deposit the penalty within 90 days.

"The Competition Commission of India has found cement manufacturers in violation of the provisions of the Competition Act, 2002 which deals with anti-competitive agreements including cartels." an official statement said.

The penalty is equivalent to 50% of their profit for 2009-10 and 2010-11, it added.

In an interview to a popular business TV channel, R Prasad, member of CCI said that the cement companies would have to cease and desist from cartelisation. He also warned that cement companies could face severe penalties, in case they were found guilty again.

The CCI passed the order following a probe by Director General of Investigation on complaint filed by Builders Association of India alleging that the cement manufacturers had formed a price cartel. However, the Cement Manufacturers' Association had denied the charges.

CCI felt that the act of these cement firms in "limiting and controlling supplies in the market and determining prices through an anti-competitive agreement is not only detrimental to the cause of the consumers but also to the whole economy since cement is a crucial input in construction and infrastructure industry vital for economic development of the country".

Earlier in 2007 the Monopolies and Restrictive Trade Practices Commission (MRTPC) found that almost all manufacturers were guilty of cartelisation. The Commission was, however, lenient and let them go with only a cease and desist order.  

"While imposing penalty, the Commission has considered the parallel and coordinated behaviour of cement companies on price, dispatch and supplies in the market," the statement said.

The CCI found that the cement companies have not utilised the available capacity so that there are reduced supplies in the market and they can raise prices in times of higher demand.

CCI felt that the act of these cement firms in "limiting and controlling supplies in the market and determining prices through an anti-competitive agreement is not only detrimental to the cause of the consumers but also to the whole economy since cement is a crucial input in construction and infrastructure industry vital for economic development of the country".

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COMMENTS

PPM

5 years ago

If the Govt allowed the builder to import cement, the problem will be solved.

R Balakrishnan

5 years ago

Looks like a very flimsy case. Impossible to prove anything. CCI is simply creating noise.

REPLY

GOVIND

In Reply to R Balakrishnan 5 years ago

Whether it is flimsy or sturdy, the CCI has done a great thing. It will have a deterrent effect for anymore cartelization in any area of mighty businesses in India.

RIL’s KG-D6 has 80% less reserves than estimated, says Niko

According to RIL’s junior partner Niko Resources, proved plus probable reserves at the KG D6 block has decreased to 1.93 trillion cubic feet (tcf) from about 9.65 tcf previous estimate

New Delhi: Reliance Industries' waning KG-D6 gas block holds 80% less reserves than previously estimated, reports PTI quoting the firm's junior partner Niko Resources of Canada.

Proved plus probable reserves at Krishna Godavari basin D6 block has decreased to 1.93 trillion cubic feet (tcf) from about 9.65 tcf previous estimate, Niko said in a statement here.

Niko holds 10% stake in KG-DWN-98/3 or KG-D6 block where RIL is the operator with 60% interest. The remaining 30% is held by BP plc of UK.

In its "Reserves and Contingent Resources Update", the Canadian oil and gas producer said total proved plus probable natural gas reserves in its various blocks have fallen almost 51% to 377 billion cubic feet equivalent (bcfe) mainly due to lower reserves in KG-D6.

"The reason for the decline in reserves referred to above relates to the D6 block. Proved plus probable reserves at D6 as at 31 March 2012 have reduced to 193 bcfe," it said.

The 7,645 sq km KG-D6 block has 19 oil and gas discoveries. Of these, production from the MA oil find began in September 2008 and from the Dhirubhai 1 and 3 gas discoveries in April 2009.

Natural gas output at KG-D6 fields has dipped to 31.33 million metric standard cubic meters per day (mmscmd) this month after hitting a peak of 61.5 mmscmd in June 2010. RIL had in 2006 stated that output would rise to 80 mmscmd by 2012-13.

Niko said the field performance at the D1-D3 fields during 2011 demonstrated "higher than expected pressure draw-downs".

"An assessment of reservoir performance concluded that, contrary to the previous geological model, the current D1-D3 producing wells did not appear to be receiving any contribution from outside the main channel areas," it said.

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Where will you fly next with an Indian airline?

Airlines in India are taking a hard look at their international route plans to fly back into profitability. This will help by keeping some sectors competitive, others will see fares go up in the days to come as options come down

A recent profitability analysis of the international network of Air India revealed that 173 of the 175 international routes do not even recover the cost of the flight, which quite simply indicates one of the reasons why the airline is going under the burden of losses on an ongoing basis. It seems like this has forced the hand of other airlines which have also been making losses on various routes, and use the global economic crisis to cut their losses.

Jet Airways has recently closed down its Mumbai-Johannesburg flights (with effect from 12 June 2012) after only two years of operations. It has announced the closure of its flight from Brussels to New York JFK from 10 September 2012. Jet Airways had two daily services to New York from Brussels (Newark and New York JFK) and the other one continues for the time being. While there are many guesses floating around on why Jet Airways pulled out, it seems they are preparing to take advantage of the multiple Brussels-New York JFK flights with its partners at Brussels and would rather cooperate than compete at such a competitive base.

The Hyderabad-Dubai service is also being shut down from 16 September 2012, while Chennai-Kuala Lumpur will be closed from 2 July 2012. In the past months, Chennai-Dubai, Delhi-Colombo and Thirunavananthapuram-Sharjah have already been eliminated.

Amongst this wholesale reduction of routes by Jet Airways, it seems like the low-cost carriers are picking the profitable short-haul routes and installing new services on those routes. IndiGo is launching flights from Chennai, Hyderabad and Kochi to Dubai in August 2012, and adding a second Delhi-Dubai and Delhi-Bangkok flight as well in the same month. 
 
SpiceJet is also preparing to go to Dubai from 25 June 2012 and is launching flights from Delhi and Mumbai to Dubai on this date.

Jet Airways is rumoured to be considering opening up operations from Brussels to Chicago or Washington DC after closing the Brussels-JFK operation. There is also a strong discussion around the channels that Jet Airways will finally work towards joining an airline alliance. It has received approvals to launch up to 35 flights to Germany, so we could expect seeing new flights to Munich/Frankfurt in the months leading up to the last quarter of the year. Approvals are also underway for flights to France, Belgium, Qatar, Saudi Arabia, Sharjah and Vietnam.

In a nutshell, while there is a shake-up prevalent in the Indian market as of now, it looks like we will be in for more connectivity with the Indian carriers upping their capacity to newer destinations shortly.

AJ writes a travel and aviation focussed blog from India at www.livefromalounge.com. You can follow him at @livefromalounge on Twitter

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