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Gay abandon in pricing

Even while arguing the case for such protection I point to the need for higher level of cost efficiencies in our manufacturing systems. For long Indian steel, Indian cement and wide range of commodities  manufactured in the country were cheaper than imported goods. Post 1991, this comfort has vanished. Even while capacities expanded massively, there has been a gay abandon in pricing. Real estate has been the most atrocious culprit as land prices have hit the roof. Price of every commodity needed for construction – cement, steel, sanitaryware, electrical items, bricks and even sand has hit the stratosphere. From the early 1980s to date, cost of construction has zoomed from Rs 300 per sq. ft. to close to Rs 3000 per sq.ft.

Look at one component of this, cement: its price has shot up from Rs 28 per bag of 50 kg to Rs 400 today!  And manufacturers complain of steep fall in demand which forces them to operate at around 60 per cent of capacity. So you witness a curious phenomenon: prices rise when there is huge demand and capacity utilisation zooms to 110 per cent. And you also suffer a huge price increase when capacity utilisation drops to 60 per cent! This is true of steel whose prices shot up from around Rs 3000 a tonne to close to Rs 50,000 a tonne in the above period.

At the retail level there is such a gay abandon in prices with little concern either on the part of the policymakers or industry. This needs quick and immediate attention.

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