Though construction activity is yet to pick up, cement prices in the country have gone by as much as Rs 6-10 per 50 kg bag in the last fortnight.

But the hike is not in direct proportion to the increase in demand, which has been marginal. Rumours are that cement manufacturers are creating an artificial supply gap and that's what is driving the prices up. On the condition of anonymity, a Mumbai-based dealer said, "UltraTech has increased its wholesale cement prices to Rs 259 per 50-kg bag. Supply is low in the market and so, cement companies are increasing prices as they wish."

Confirming the moves, a senior member of Cement Stockists and Dealers Association, who also did not wish to be named, said: "Yes, it is true that there is a supply shortage in the market which is leading to increase in prices. Demand has also picked up a little."

However, Vinod Juneja, managing director, Binani Cements, attributed the supply crunch due to the shortage of railway wagons for distribution of cement.

Calling the crunch "temporary", he said, "Demand was showing some signs of revival in the last three months, but it suddenly shot up because the government has to spend the money allocated for infrastructure this fiscal before March 31 and also because there is no supply coming from the North to western India, particularly Mumbai, Pune and Nashik."

But dealers say the shortage has been created artificially to indicate pick-up in demand. They allege cartelisation by cement majors to push up prices and create a demand-supply gap.

Requesting anonymity, a dealer in Kolkata said, "In last 20 days, prices have been hiked twice by Rs 5 each. So now, retail prices for a bag is Rs 245-246. For wholesale cement, it is Rs 238-240 per 50 kg bag." In Kolkata, however, demand hasn't picked up much.

Another Kolkata dealer, who did not wish to be named, said, "Cement makers have reduced their supplies and are creating a crisis in godowns. There are no problems with transportation but supply gap is leading to price hikes."

The northern region isn't better off. Prices have increased by Rs 2-5, with retail going for Rs 225 per 50 kg bag. H M Bangur, managing director of Shree Cement, and president of Cement Manufacturers' Association, said, "The price hike is marginal in north India but demand is picking up there. So we are not supplying to the western market."

Down south in Chennai, prices have gone up by Rs 5 per 50 kg retail bag to Rs 270. For wholesale, they're up Rs 3 to Rs 265 per bag. Dealers in Perembur, Porur and other areas said that there is neither supply crunch nor demand pick-up in the region.

A Chennai-based dealer said, "Prices were increased a fortnight back but demand fell from January onwards compared with in November-December."

An analyst with a foreign brokerage, requesting anonymity, said, "Cement shortage was for couple of days in Mumbai due to transportation problems, which is why cement makers hiked prices. It is a short-term phenomenon. Also, cement companies that have announced price cuts on bulk cement haven't implemented them yet."

Pooja Sarkar/ DNA-Daily News & Analysis Source: 3D Syndication