Ambuja Cement has now become dearer by Rs 3 per bag in the country's largest cement market, other leading players Larsen & Toubro, ACC and Grasim are expected to follow suit.

GACL, it is learnt, has reduced its dealer commission late last week by Rs 3 per bag, thus, in effect raising its retail prices by a similar margin. With this round of price revision, Ambuja cement has pipped past arch rival L&T in terms of price and is now the most expensive brand in the city.

Ambuja Cement is now available to the dealer at Rs 141 per bag, while the price of L&T cement is around Rs 138 per bag. ACC cement sports a price tag of around Rs 135 per bag.

Notwithstanding the concerted efforts to hike prices, cement companies are unanimous that demand is still under considerable pressure and that it might become difficult tosustain the current price level if this trend continues.Although industry dispatches this fiscal are higher by over 20 per cent, analysts say that the growth may be difficult to sustain in the second half."For the cement sector, the second half of last fiscal was much better than the first half. The 20 per cent growth in dispatches this year has been possible largely owing to the low base in the same period last year. Things might not be as rosy in the second half," said an analyst.

Although prices are relatively stable in Gujarat at around Rs 125 per bag, things are quite different in Maharashtra. Cement prices in Pune, it is learnt, are hovering at around Rs 105-110 levels, which is almost Rs 20 lower than the price prevailing two months back. Pune is quite a significant market for cement with monthly demand in the region of Rs 1.5 lakh tonnes.

The price situation in Nagpur, say industry observers, is worse with prices ruling at Rs 85-90 per bag. In fact, the entire region, which includes part of MadhyaPradesh, is reeling under a severe price depression with cement prices in Raipur down to almost Rs 75 per bag.

The oversupply problem is taking its toll in the region as prices have crashed to Rs 75-80 per bag and analysts are sceptical that retail prices may drop to lower levels in the coming days. Madhya Pradesh with its large limestone deposits is the country's largest producer of cement with a capacity of 25.7 million tonnes, although the demand is only around five million tonnes.

Even in the south, cement prices are under tremendous pressure, with a steep fall in Andhra Pradesh prices affecting the price situation in the neighbouring Tamil Nadu and Kerala. Prices in AP are hovering around Rs 110 level and may fall further during the monsoon which will hit the state in the next few days.

Prices per bag have dropped by almost Rs 5-10 per bag in Tamil Nadu and Kerala in the last few days, and matters might get worse as local players are reportedly resorting to severe undercutting to pushvolumes.

INSIGHT:

Price effect in Gujarat unlikely

In Mumbai, the single-largest market, Gujarat Ambuja continues to have the highest market share in the retail segment and also commands the highest price. This is primarily on account of better marketing. In the last couple of months, L&T has been fetching a lower price than Ambuja. ACC comes third and retailers are pushing low-priced 25kg ACC bags (instead of 50 Kg) although margins are lower for these bags.

With cash crop failing in Saurashtra and Ambuja setting up 1 mtpa clinkering capacity which will go onstream in June 2000, Gujarat will not see any price improvement. Also, any hike in cement prices has to be adjusted for the year end quantity discount to dealers.

-- Urmik Chhaya