A. Harikumar
When GST was introduced in July, 2017 in Kerala, the construction industry in the state was hopeful that cement prices would come down or at least stabilize giving a fillip to the construction activities in the state. The hope was based on the fact that gross taxes including excise duty and VAT (value added tax) which amounted to 31 percent of the price earlier was reduced to 28 percent in GST regime.
But the reality turned out to be sour. Cement prices steadily climbed up in Kerala after the implementation of GST. The trend of rising prices continues till date; Average price per packet of cement which was around Rs 400 in 2020 spiralled up to over Rs 425 in 2021. In the prevailing conditions, this trend could continue. Construction industry in Kerala feel that cement companies have formed a cartel, and is propping up prices denying the consumer, the benefit of lower taxes.
Recently, Kerala Opposition Leader V. D Satheeshan, while addressing a protest of different organisations in the construction sector led by Kerala Government Contractors’ Association (KGCA), before the state legislative assembly, said the cartel of cement companies are artificially propping up prices in the state and it is affecting Kerala’s development. He criticised the state government’s negligence in the issue.
State government’s negligence
Meanwhile, the cavalier attitude of state government towards the demands of construction industry has given confidence to cartels of cement manufacturers to boldly implement their agenda. Speaking to vikasmudra about the price scenario, Sirajudheen Ellathodi, a leading cement trader and general secretary of Kerala State Cement Dealers’ Welfare Association said it is true the cement prices remain high in Kerala and the government is not taking meaningful steps to control the price rise.
Referring to the initiatives of Tamil Nadu government to this extent, he pointed out that the Amma Cement launched by the previous AIADMK government and Valamai cement recently launched by the present DMK government are successful market interventions to control prices and increase availability of cement. Kerala government hasn’t made any such initiatives. The state is totally dependent on cement imports from other states. The state produces less than 10 percent of the total cement consumed in the state, he said.
Malabar Cements
Despite huge scope for development Kerala government hasn’t shown the resolve and acumen to increase the production of Malabar Cements Limited, the biggest cement manufacturer in the state, states Sirajudheen. Even when the company enjoys significant advantage in transport costs within Kerala, compared to producers from other states, the company is unable to sell their product at lower prices ostensibly because of their high cost of production.
Malabar Cement which was expected to play a balancing role in Kerala market failed to live up to expectations and ended up as a white elephant. The story of Travancore Cements Ltd is not different either. Meanwhile, high cost of cement and other construction materials in Kerala have landed the construction industry in the state in a quandary. It is not just the common man or contractors who are afflicted. The state government itself is the biggest consumer of cement and other construction materials and works of the government is suffering the most.
