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Cement Prices – Random Populism

Posted by fairval on March 11, 2007

Media has universally panned govt’s move to cap cement prices for one year and rightly so (see story).

This is merely a populist move by a Cong govt beginning to increasingly show its socialist stripes with an eye on various upcoming elections. What needs to be analysed a bit is – Just who does this price capping help?

Lets see who buys cement in India:

Govt: These days very little I think. There was a time when govt used to buy 30% or so of cement. Now this could be less than 10%. Most infra construction is now done by the pvt sector
Construction Cos: Yes, their projects would have become somewhat expensive. But how much is cement as a % of total cost of says a road, or a power plant? This needs to be checked first.
Builders: What builders sell is a house, and housing prices have gone up dramatically in all top cities of India. That price rise has nothing to do with cement prices.
Individuals for their own homes: This is the real segment which govt may be trying help out. This is an off the cuff number, but this population may not be even 20% of India’s population. Lets see why. Urban India has 30-35% of India’s pop. Of that, atleast 30% stay in houses made by builders, where prices have their own logic (speculation is a larger element). 20%-40% or urban population is slums. In rural India, where 65% or so of India lives, how many live in pucca housing? Very little, even at all India basis, as the following data shows:

Check it, only less than 3% of households (data in that table is % households) live in proper concrete houses. Most of India lives in brick houses, which I think refers to what u see in rural India – brick and mortar houses not covered by concrete. These houses use very little cement, as part of the mortax mix. Atleast 50% of houses in India have nothing to do with concrete. Of the remaining 50%, my guess is the rich urban India, living developer made houses, may consume a lot of cement. Here house prices are driven more by speculation.

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One Response to “Cement Prices – Random Populism”

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