The improved despatches of cement that has been a cornerstone of the rally can be partly attributed to elections resulting in a rush to complete various pending Government projects. This is clearly evident in Andhra Pradesh (AP). One of the factors that has contributed to higher net cement realisation (net sales in the cement sector means net of excise and freight) of L&T is that in the second half of 1998-99, the bulk terminals at Navi Mumbai and Mangalore went operational (0.5 mt each). A second reason is that the price in the Mumbai market has been hiked by Rs 8 per bag in May in a range of Rs 160-165 per bag.The prices in Gujarat are also in the range of Rs 115-120 per bag. Though demand in Mumbai has hardly shown any improvement, the hike will act against a cushion during the monsoon months when prices will decline by at least Rs 15 and the fall in price in Gujarat will also have an adverse impact in Mumbai market if net of freight, the realisations are still better. The beneficiary obviously has to be large players because the latest price hike has not been accompanied by any additional incentives to dealers and thereby almost the entire contribution is reflected in NCR. The volume and price increase will cut down the loss of the cement division of L&T resulting in improved profits for the company in the current year.

ACC is a national player and will benefit immensely from the price prevailing in east India at Rs 160 per bag. The company will also hike the price in the Mumbai market by Rs 3 per bag in a week. Again, being a large volume player, any hike in price results in much improved margins. An addedadvantage for ACC is the ready mix concrete (RMC) division. The state government is desperately trying to get as many fly-overs as possible completed before the monsoon and this means brisk buisness for the RMC division.

In the south, the situation is also much better. Since March, prices have been hiked by Rs 16-20 per bag. The demand in the cement state-AP has been particularly robust as the state goes to the polls. The cement consumption will not be affected in a big way in the south due to the South-West monsoon because SW monsoon would be very active only in Kerala and in coastal Karnataka. In Kerala construction activities normally continue through this period though a 10 per cent fall in consumption is still expected. The demand in Tamil Nadu, AP and other places are such that the fall in offtake would be compensated. Pressure on prices is unlikely unless the manufacturers' start fighting with each other. This is reflected in the stock prices of ICL and Madras Cements. For Madras Cements NCR is thehighest in the last three months. The only region excluded from the price hike is Madhya Pradesh, where prices are ruling below Rs 100 per bag.