BL reported that cement manufacturers are in a fix due to skyrocketing coal prices, which is pushing up the cost of the commodity even as the government is determined to bring down cement prices. According to industry sources, the industry is facing shortage of domestic coal supplies, coupled with a sharp rise in the import price of coal.

Mr Ramesh Chandro MD of Ckoramaandel Cements said that "The permits of Coal India Limited have been lowered in April 2008 due to shortage of coal. A cement company will now get only 64% of the coal originally allocated to it. This is the second cut in the permit of coal after a 20% cut some time ago." He added that the e auction of coal is also adding to the irregularities in coal prices increasing the production costs.

Current cement prices in different regions

Price in INR per bag

According to Mr Srikant Reddy general secretary of All India Mini Cement Manufacturers Association, coal prices were revised upwards three times last year by major suppliers. He said that "Coal India Limited alone had increased prices three times while cutting the permit by over 25%. Another round of hike is in the offing. All this is likely to push up cement prices further."

Coal prices

In INR per tonne

Meanwhile, to tide over the supply shortage, cement manufacturers are opting for imported coal to a considerable extent. This may push up the cost of production as the price of imported coal has increased significantly over last 6 months.

An official of the Cement Manufacturers Association said that coal contributed to 65% to 70% of the cost of cement and its prices increased more than 100% in the last one year. He added that there was about 5% hike in the cement prices across India in the same period.