Curious Case of Assam Cement Selling Cheaper in Bengal

Most of us flock to Meghalaya to purchase petrol/diesel for our vehicles, as these products are cheaper in the neighboring state as compared to Assam. This is because petrol/diesel are out of the ambit of GST, and therefore, doesn't fall under the concept of "One Nation, One Tax", and are taxed differentially across states. But what about cement?

Ever wondered why you are paying nearly Rs. 400 for each bag of portland cement, while someone in Kolkata is paying around Rs 280 for the same? This despite the fact that cement attracts an uniform GST rate of 28% throughout the country, with Integrated GST (IGST) on inter-state trade, and Central GST and State GST on intra-state trade in the product. More importantly, Northeast, especially Meghalaya and Assam, is the hub of cement manufacturing in the country, and manufacturers enjoy a slew of incentives such as tax holidays, land at subsidized rates, subsidized electricity, among others.

The Sentinel brings to you a detailed analysis and probable reasons for the same:

Firstly, cartelization by cement manufacturers is one of the prime reasons behind the discriminatory prices prevalent between the Northeastern market and other parts of the country. Cartelization is not limited to only Assam or Meghalaya but throughout the country, validated by the fact that the fair competition watchdog Competition Commission of India (CCI) had in 2016 imposed a cumulative penalty of more than Rs. 6,000 crore on top cement manufacturers for price manipulation throughout the country, which included names such as India Cements, Century Cements, JK Cements, Ultra Tech, Jaiprakash Associates Limited, among others. Though this CCI order seem to have worked in favour of consumers in the mainland, the price trend in the Northeast suggests that there has been no effect of this order on cement manufacturers here.

The price difference between the Northeast and rest of the country, of the same brand and same quality cement, with manufacturing base in Assam and Meghalaya, such as Star Cement, Adhunik Cement, Best Cement, Hills Cement Company Limited, Purbanchal Cement Ltd, Amrit Cement, RNB Cements, Goldstone Cement, among others could be as high as Rs. 100. Without cartelization and unwritten understandings among the manufacturers, is such a price difference possible?

Secondly, the politician-bureaucrat-manufacturer nexus is a major reason behind the high prices of cement here. Prices in Assam in particular follows a peculiar pattern: In the run-up to every Elections to State Assembly, prices dip to a never-before level but after the formation of government in Dispur, irrespective of which party with whatever ideology forms it, prices zoom to new heights.

In a couple of months of the BJP coming to power in Assam in 2016 under the leadership of Sarbananda Sonowal, prices saw a rise of Rs. 40 across all brands, which was finally capped at Rs. 20 after the Chief Minister intervened under pressure from various quarters.

Consumer rights activists are of the opinion that such a daring loot by cement manufacturers are not possible without covert support and blessings of the ruling dispensation. What else could be the reason behind the abrupt increase in prices right after coming to power of the Bharatiya Janata Party (BJP)?

The plundering of consumers in Meghalaya can be considered even worse than that in Assam. In June 2017, prices of cement in Shillong was increased by more than Rs. 100 from Rs. 280 to Rs. 400, a whopping 35% hike. The manufacturers' excuse that the rise in prices was due to increase in prices of raw materials was found to be without any substance as during the same period, prices of raw material decreased from Rs. 5,000- 6,000 per metric ton (MT) to Rs. 2,500- 3,000 per MT, a dip of nearly 50%.

Manufacturers flock to Meghalaya due to easy and abundant availability of raw materials such as limestone for cement production, subsidized electricity, low cost of labour, cheap electricity and the tax holidays under the Union government's policy to boost industrialization in the Northeast.

Despite reaping the benefits of industrial policies of the Northeast, using raw materials and other resources, it is the people of the Northeast who are being plundered by the manufacturers while the elected representatives and bureaucrats turn a blind eye, reason for which is known to all.

The Assam Real Estate and Infrastructure Developers' Association (AREIDA) had in September 2016 filed a case with the CCI against Star and Topcem Cements against the ‘unjustified’ rises in the price of cement. The Competition Commission of India (CCI) then appointed an officer to investigate the allegations, and after a preliminary inquiry, the CCI had registered a case against the three companies with Case No. 77/2016, under Section 19 (1) (a) of the Competitions Act 2002, for violation of Sections 3 and 4 of the Act.

Cement is the basic material in the construction industry and real estate industry, and those in the construction sector in Assam are of the opinion that all construction activities, including the Prime Minister's ambitious "Housing For All" scheme, would come to a halt if the price rise is not halted or reversed. They too allege that without greasing the palms of powerful persons in corridors of power, manufacturers would not dare raising prices to such an absurd level in the Northeast.

However, these companies were back to their old ways in few months, as many allege, with a little help from their "powerful friends".

Owning a house is the dream of every middle class family, and their sacrifices such as mortgaging household valuables to secure a housing loan is well known. But with the never-ending price increase of cement, this dream of millions of middle-class families of this country in general, and Assam in particular, is on the verge of being dashed to pieces. But are our representatives listening?