Cement Price Decontrol, 1989

Imagine a factory owner who knows exactly how much it costs to produce a bag of cement, but is legally forbidden from charging a price high enough to justify building a second factory, because the government has fixed the selling price too low to fund real expansion. That was genuinely India's cement industry for most of the decades after independence, prices and distribution both controlled by the state, treating cement as an essential commodity whose price couldn't be left to market forces.

The predictable result was chronic shortage, fixed prices weren't attractive enough to justify reinvestment, modernisation or new capacity, so supply consistently lagged demand throughout the control era, exactly the outcome price controls tend to produce when they hold prices below what's needed to fund growth, and cement rationing became a normal part of Indian construction for years.

The government moved away from this gradually rather than all at once, partial decontrol in 1977 and again in 1982, before cement was fully decontrolled from both price and distribution on March 1, 1989, and finally de-licensed, meaning companies no longer needed government permission to build new plants, on July 25, 1991, aligning cement's liberalisation with India's broader 1991 economic reforms.

Every capacity expansion announced by an Indian cement major today, UltraTech's push past 200 million tonnes, Ambuja's climb toward 155 million tonnes, is only possible because of this specific 1989-91 policy shift, before it, no cement company could have justified the capital investment these expansions require, because prices simply weren't allowed to reflect what that investment was actually worth.