Builders’ Association of India, the apex association of engineering construction contractors, plans to set

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up around four to five cement plants across India in the next three years with an aim to make cement available to its members at Rs 150-160 per 50 kg bag. Currently cement prices at the retail end range from Rs 250-300 per 50 kg bag.

“The cement companies have cut production to increase cement prices. We are planning to set up our own cement plants to resolve the problem of cartelisation and persistent price hikes by cement companies,” said Bhagwan J Deokar, President at Builders Association of India. He said cement plants each of around five million tonnes per annum capacity costing around Rs 2250 crore would be set up across the country.

“The funding for the plants would be done through a ratio of debt and equity. We will have 25 per cent equity and 75 per cent debt,” said Deokar. The first plant is likely to come up in Andhra Pradesh, then in Karnataka, Gujarat, Madhya Pradesh and

Chattisgarh.

However, analysts said that coming up with a cement manufacturing plant by Builder Association is not a viable option. Vineeta Singhania, managing director at J K Lakshmi Cement said, “to set up a one million tonne per annum cement plant costs around Rs 5,500 crore. The cost of production of cement per 50 kg bag is over Rs 200. If the BAI is able to offer cement at Rs 150-160 kg per bag then cement companies will come and learn from them.”

“The cost of production per 50 kg bag is over Rs 200. So to offer cement at Rs 150-160 per bag is difficult,” said Jaspreet Singh Arora, analyst at Anand Rathi Securities.

Singhania said “the Builders’ Association may be trying to put pressure on cement companies to bring down prices but they have to realize one thing that cement prices are going up due to rise in excise duty and input costs.”

In March cement companies hiked prices twice. In the January-March 2011 quarter prices have been hiked by Rs 50-70 per 50 kg bag. Rajesh Kumar, analyst at Ambit Capital said, “DLF and Larsen and Toubro both have exited cement manufacturing. Existing cement companies’ margins are under constant pressure due to oversupply. So adding to this supply by Builders’ Association is not at all a viable option.”