I. Introduction
Earlier this year, the Union Minister of Road Transport underscored cement cartelization as a major hurdle to the nation’s infrastructure development. This is not the first instance of the cement industry facing such serious allegations; it has been repeatedly criticized for exhibiting a oligopolistic nature. More than half of the total cement market share and total installed manufacturing capacity are controlled by just five dominant companies. This high degree of concentration enables anti-competitive practices that stifles innovation, deters new entrants, and ultimately undermines the sector’s long-term growth and competitiveness.
India is currently the second largest producer of cement in the world after China. Given its economic significance, regulatory scrutiny of the cement sector’s conduct becomes critical. According to a KPMG & NSDC report, the cement industry provides direct employment to nearly 1.4 million people. India’s current annual installed capacity of the cement industry is 622 million tonnes, playing a pivotal role in construction and real estate sectors. The industry is projected to grow at a compound annual growth rate (CAGR) of 4.9 per cent, reaching 5.09 billion tonnes by FY29. As the growth in cement production has surpassed the pace of GDP growth in recent years, it is crucial to examine this key regulatory challenge confronting the sector.
This piece aims to critically examine the persistent issue of cartelisation plaguing the Indian cement industry, highlighting its oligopolistic structure, repeated clashes with the enforcer, regulatory hurdles and suggesting a way forward.
II. The Long Fight Against Cement Cartels
Cartelization is expressly prohibited under Section 3(1) of the Competition Act, 2002. Specifically, the Act defines a “cartel” under Section 2(c) as: an association of producers, sellers, distributors, traders, or service providers who, by agreement among themselves, limit, control or attempt to control the production, distribution, sale, or price of, or, trade in goods or provision of services. Cartels are the most serious of all competition law violations, undermining the very foundations of a free and fair market. For several decades, the cement industry has been locked in pitched battles with Competition Commission of India (CCI), the nation’s apex antitrust regulatory body, over accusations like artificial price inflation and market manipulation.
The most notable case was Builders’ Association of India v. Cement Manufacturers’ Association & Ors. of 2012, where Builders’ Association of India (BAI) claimed that the enlisted 11 cement manufacturers were engaged in monopolistic and restrictive trade practices by restricting the production under the guise of Cement Manufacturers’ Association (CMA) meetings. They also argued that despite the utilization of various government-backed concessions, there was no reduction in cement rates and instead manufacturers increased the per bag price to gain undue profit. CCI held CMA and its member entities to be liable for violation of price parallelism and facilitating illegal cartelization. As a result, the Commission imposed a ₹6,307 crore penalty, the largest cumulative fine in Indian antitrust history, on leading cement companies such as UltraTech, ACC, Ambuja, and others.
This 2012 order was challenged before the Competition Appellate Tribunal (COMPAT) on grounds of due process and violation of natural justice principles. The Tribunal set aside the original order, prompting the CCI to re-hear the matter. In the 2016 order, the CCI reaffirmed its earlier findings and imposed penalties amounting to 0.5 times the net profits of the companies for financial years 2009-10 and 2010-11 for violation of the cartel provisions of the Act. The Supreme Court (SC) in 2018, granted a stay of payment of penalty and asked them to deposit only 10% of the amount.
Further developments occurred in 2019, when the CCI launched another probe into suspected cartelization in the cement industry, triggered by complaints of collusive behaviour. Following this, in December 2020, CCI conducted surprise raids on the offices of top five cement manufacturers. The CCI’s investigation arm was entrusted with examining the allegations and submitting a comprehensive report.
According to a Reuters report, simultaneous search operations were conducted across multiple offices across the country leading to the seizure of substantial physical and electronic evidence, including documents, WhatsApp messages, personal emails and communication equipment that were used as communication tools by executives. Key strategies used by companies were “kiln closure” agreements (informal understandings to restrict cement production in a coordinated manner) and district-wise price charts were also circulated to ensure uniform price hikes and eliminate competitive pricing.
This probe highlights the deeply entrenched nature of collusion in India’s cement industry. While the CCI has shown commendable proactiveness in initiating raids and compiling evidence, it continues to face significant challenges in enforcing deterrence and regulating such entrenched anti-competitive practices in the cement sector.
III. Challenges faced by the Watchdog
Cartelisation to the CCI is what insider trading is to SEBI. Both regulators face a “needle-in-a-haystack” challenge as finding direct evidence is rare, and they must often rely on circumstantial evidence like parallel pricing. The burden of proof is high to establish these crimes. The key hindrances faced by the agency are:
Judicial Pushback Weakening Enforcement
The CCI frequently faces judicial interventions that dilute its enforcement capabilities. Courts often overturn or modify CCI orders, weakening the deterrent effect of CCI’s actions. In July 2021, the Madras High Court directed the Director General of the Tamil Nadu Police to investigate complaints regarding the cartelization of certain cement manufacturers. This judicial intervention raised concerns about parallel investigations undermining the CCI’s exclusive mandate to probe anti-competitive agreements. More recently, the Gauhati High Court quashed CCI proceedings against three cement companies in the North-East Region over alleged cartelisation. The court’s decision highlights the growing trend of judicial pushback against CCI investigations.
M&A Surge and Structural Risks
The Competition (Amendment) Act, 2023 was introduced in April 2023 to bring reforms to enhance scrutiny of Combination—mergers, acquisitions, or amalgamations that could potentially cause an Appreciable Adverse Effect on Competition (AAEC) in the Indian market. Despite these provisions, the Indian cement industry has witnessed a significant surge in M&A activity, with over ten major deals recorded in 2024 alone. This consolidation trend, aiming to expand geographical reach and market share, raises concerns about potential anti-competitive outcomes, especially given recent high-profile market entrants. This can be addressed through CCI-backed structural remedies, such as offering tax breaks, enhancing pre-merger notifications and strengthening its own capacity.
Chronic Human Resource Shortage
CCI has had an unprecedented staffing problem since its inception. Since the financial year 2014–15, it has never operated at its full sanctioned strength. Majority of staff within the office of the Director General serve on short-term deputations, which severely hinders the development of long-term domain expertise in investigating anticompetitive practices. A significant portion of its membership comprises retired bureaucrats, many of whom may lack prior experience in competition law enforcement. The Centre delayed appointing a new CCI Chairperson for over seven months after Ashok Gupta’s retirement, leaving the Commission impaired. Even now, Ravneet Kaur holds dual charge as NFRA Chairperson, straining her capacity to focus solely on CCI. This leadership vacuum has contributed to a growing backlog of critical cases, including tech giants like Apple and Google too. Addressing this backlog requires immediate institutional strengthening.
Weak Leniency and Whistleblower Culture
In the last five years, CCI has investigated 35 cartel cases across diverse sectors, yet only one has resulted in a final order, highlighting an unawareness about the leniency regime among the cartel participants. The leniency program under Section 46 of the Competition Act, designed to incentivize whistleblowers, has also seen limited success due to judicial skepticism. In contrast, jurisdictions like the U.S. and EU, where leniency applications have significantly aided cartel detection and remain the primary mechanism through which cartels are uncovered.
Ineffective Penalty Enforcement
Enforcing monetary penalties remains another area where the regulator has struggled. Since 2011, CCI has imposed 183 billion INR in penalties but recovered only INR 4.25 billion, just 2.3% of the total. The absence of a mandatory pre-deposit for appeals allows companies to challenge penalties without consequence, as seen in the COMPAT order, which stayed a ₹630-crore penalty on DLF imposed by CCI, was later overturned by SC. Without reforming the appellate process, the deterrent value of CCI’s penalties remains significantly weakened.
IV. Way Forward
To effectively curb cartelization in India’s cement sector, a comprehensive strategy is imperative. Strengthening the CCI must begin with increasing its budget, upgrading forensic and technological capabilities, and appointing domain-specific experts. Filling staffing gaps and introducing mandatory pre-deposit requirements for penalty appeals will help expedite enforcement and discourage frivolous legal challenges.
The recent suggestion by the Union Minister for a dedicated regulator for cement and steel sectors further reflects the urgency of specialized oversight. Therefore, the CCI must be empowered with advanced tools on par with those of the U.S. DoJ. unannounced dawn raids, and immediate access to digital communications and financial records, provided appropriate legal safeguards are in place. They are essential to detect and dismantle sophisticated cartels.
Institutionalising an external whistleblower framework, akin to SEBI’s informant mechanism under the PIT Regulations, can significantly strengthen detection mechanisms by enabling third parties like employees or auditors to report anti-competitive behaviour confidentially. By ensuring anonymity, procedural safeguards, and financial incentives, such a system would encourage timely and credible insider disclosures. Proactive monitoring of M&A deals, aided by artificial intelligence, is crucial to preventing excessive market concentration.
Lastly, enhancing coordination between CCI and other agencies will help avoid overlapping investigations. Simultaneously, promoting new market entrants through tax incentives and infrastructure support can dilute existing oligopolies. Together, these measures can foster a more transparent, and innovative cement industry—contributing to India’s long-term economic growth.
This blog is written by Madhvendra Jha, undergraduate Law Student.
